us* 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


BY 

1.  M.  RUBINOW,  M.D.,  PH.  D. 

<M 

Executive  Secretary  Social  Insurance  Committee,  American 
Medical     Association;     Author     "Social     Insurance," 
"  Standard  Accident  Table,"  etc. ;  Lecturer  on  Social 
Insurance,  N.  Y.  School  of  Philanthropy,  1912- 
1915 ;  President  Casualty  Actuarial  and  Sta- 
tistical Society  of  America 


NEW  YORK 

HENRY  HOLT  AND  COMPANY 
1916 


/f  ftr/  -<-> 


COPYRIGHT,  1016 

BT 

HENRY  HOLT  AND  COMPANY 
Published  September,  1916 


TMI    OUINH    •    tOOl"    CO.    P*fM 
BANWOT,    «.   J. 


PREFACE 

THE  time  appears  ripe  for  a  comprehensive  study  in 
English  of  European  experience  with  sickness  insur- 
ance, but  the  little  book  offered  to  the  readers  does 
not  pretend  to  meet  this  need.  Its  purpose  is  a  very 
much  more  modest  one. 

The  movement  for  sickness  or  health  insurance  in 
this  country  has  been  growing  so  rapidly  within  the 
last  few  months  that  there  appears  to  be  a  demand 
for  a  brief  and  popular,  though  scientifically  sound, 
discussion  of  the  essential  principles  underlying  it 
and  the  various  provisions  which  go  to  make  a  suc- 
cessful health  insurance  scheme;  and  without  many 
excursions  into  the  domains  of  statistics  of  history, 
this  book  endeavors  to  cover  this  particular  field. 

The  subject-matter  has  largely  appeared  in  the 
Journal  of  Political  Economy  for  March,  April,  and 
May,  1915,  but  in  that  form  has  reached  a  very 
limited  circle  only.  Some  new  additional  material 
was  added  that  had  to  be  omitted  from  the  original 
articles  because  of  considerations  of  limited  space. 

The  articles  appeared  originally  under  the  title  of 
"  Standards  of  Sickness  Insurance,"  but  within  the 
last  few  months,  largely  due  to  the  decision  of  the 
Social  Insurance  Committee  of  the  American  Asso- 
ciation for  Labor  Legislation,  the  term  "  Health  In- 

iii 

& 


Iv  PREFACE 

surance "  has  obtained  wider  publicity,  and  it  was 
decided  to  accept  the  new  term  in  this  study.  There 
were  largely  three  considerations  which  influenced 
the  Social  Insurance  Committee  in  favor  of  the  term 
"  Health  Insurance  "  rather  than  "  Sickness  " : 

First. — The  term  "  Health  Insurance  "  has  been 
adopted  and  has  been  in  use  for  some  time  by  com- 
mercial insurance  companies. 

Second. — It  seemed,  in  the  opinion  of  the  com- 
mittee, to  emphasize  the  preventive  character  of  the 
measure. 

Third. — It  has  the  weight  of  British  precedent  be- 
hind it. 

The  last  consideration  may  not  be  altogether  a 
fortunate  one,  because,  as  will  appear  to  the  reader 
of  these  pages,  the  scheme  suggested  on  the  whole 
approaches  the  German  system  much  more  closely 
than  the  British  one  and  the  shortcomings  in  the 
workings  of  the  British  system  have  been  frequently 
pointed  out  in  this  book.  Health  Insurance  plans 
at  present  before  the  people  of  this  country  should 
not  be  judged  too  harshly  by  some  experiences  under 
the  British  precedent. 

It  is  very  difficult  to  find  a  purely  logical  argu- 
ment for  the  selection  of  either  term.  There  is  no 
one  guiding  principle  in  designating  various  branches 
of  insurance.  In  some  branches  the  person,  object, 
or  condition  insured,  and  again  in  others  the  hazard 
insured  against,  serve  as  a  designating  term.  Thus 
we  speak  on  one  hand  of  workmen's  insurance,  or 


PREFACE  v 

life  insurance,  or  plate-glass  insurance,  or  health  in- 
surance, where  the  term  is  based  upon  either  the 
person  (workman),  or  condition  (health  or  life),  or 
object  (plate  glass)  insured,  but  we  also  speak  on 
the  other  hand,  of  fire,  burglary,  accident  insurance, 
etc.  An  arbitrary  decision,  therefore,  seems  justi- 
fied. 

I  am  under  great  obligations  to  Prof.  Joseph  P. 
Chamberlain,  of  the  Legislative  Drafting  Bureau  of 
Columbia  University,  for  his  kindness  in  preparing 
the  valuable  chapter  discussing  the  "  Constitution- 
ality of  Health  Insurance  " ;  to  Dr.  Alexander  Lam- 
bert, Chairman  of  the  Social  Insurance  Committee  of 
the  American  Medical  Association,  for  his  permission 
to  use  his  report  on  "  Organization  of  Medical  Aid  " ; 
to  the  Journal  of  Political  Economy  for  permission 
to  reproduce  articles  which  have  appeared  in  that 
publication,  and  to  Mr.  Solon  De  Leon,  of  the  Ameri- 
can Association  for  Labor  Legislation,  for  his  care- 
ful reading  of  the  proofs  of  the  entire  book. 

June,  1916.  I.  M.  R. 


CONTENTS 

CHAPTER  PAGE 

I  INTRODUCTORY       1 

II  THE  PRINCIPLE  OP  COMPULSION  .        .  18 

III  EXTENT  OF  HEALTH  INSURANCE         .  29 

IV  THE  SCOPE  OF  HEALTH  INSURANCE   .  43 
V  MEDICAL  BENEFITS        ....  67 

VI  MONEY  BENEFIT  94 

VII  MATERNITY  BENEFIT  .  .  .  .116 

VIII  FUNERAL  BENEFIT  .  .  .  .140 

IX  OPTIONAL  BENEFITS  .  .  .  .145 

X  BEARING  THE  COST  .  .  .  .153 

XI  DISTRIBUTION  OF  COST  ....  168 

XII  ORGANIZATION  OF  INSURANCE  .  .178 

XIII  ADMINISTRATIVE   ORGANIZATION  .  .     204 

XIV  FINANCIAL  ORGANIZATION      .  .  .     214 
XV  ORGANIZATION  OF  MEDICAL  AID  .  .     232 

XVI     ESTIMATES  OF  COST       ....     260 
APPENDIX  I     CONSTITUTIONALITY  OF  HEALTH 

INSURANCE 275 

By  Joseph  P.  Chamberlain. 
APPENDIX  II     ORGANIZATION  OF  MEDICAL  AID     295 

By  Alexander  Lambert,  M.D. 
INDEX  313 


STANDARDS   OF   HEALTH 
INSURANCE 


INTRODUCTORY 

WITH  the  rapid  conquest  of  public  opinion  over 
popular  prejudices  in  matters  of  employers'  liability, 
the  United  States  stands  committed  to  the  policy  of 
social  insurance.  Without  exaggeration  this  is  the 
most  significant  advance  in  the  social  policy  of  this 
country  during  the  last  two  decades,  and  the  speed 
of  progress  is  a  very  noteworthy  feature.  Consider- 
ing the  enormous  amount  of  legislative  work  required 
the  progress  made  by  the  workmen's  compensation 
movement  since  1908  is  amazing. 

On  May  30  of  that  year,  the  U.  S.  Congress,  urged 
on  by  President  Roosevelt,  passed  the  first  American 
compensation  act,  narrowly  limited  to  a  small 
minority  of  the  employees  of  the  Federal  Govern- 
ment, and  pathetically  inadequate  in  its  benefit 
provisions.  Two  years  later,  the  first  general  state 
compensation  act  was  adopted  by  the  legislature  of 
the  State  of  New  York,  and  soon  was  declared  un- 
constitutional. The  first  state  act  to  remain  in  force 

1 


2        STANDARDS  OF  HEALTH  INSURANCE 

went  into  effect  in  New  Jersey  on  July  4,  1911. 
But  on  January  1,  1916,  thirty-three  states  and 
territories  had  compensation  acts  in  force.  Of  the 
remaining  states  a  good  many  are  in  process  of  pass- 
ing or  preparing  their  acts ;  only  in  the  solid  South 
may  a  few  states  be  found  in  which  no  movement 
toward  abandoning  employers'  liability  has  been 
started.  But  the  acts  of  Maryland,  Kentucky,  and 
West  Virginia  in  the  north,  Louisiana  in  the  south, 
and  Oklahoma  and  Texas  in  the  west  are  a  signifi- 
cant indication  that  at  least  in  this  branch  of  labor 
legislation  the  "  solid  South  "  is  solid  no  longer. 

Undoubtedly  a  good  many,  perhaps  most,  of  the 
acts  are  far  from  granting  all  that  may  be  expected 
of  a  fair  and  just  system  of  workmen's  compensation. 
The  radical  changes  already  made  in  many  of  the 
acts,  as,  for  instance,  those  of  California,  Connecti- 
cut, Massachusetts,  Minnesota,  Ohio,  and  Wisconsin, 
notwithstanding  the  very  short  experience  with  the 
original  enactments,  show  that  the  whole  matter  of 
compensation  is  as  yet  in  the  formative  stage.  But 
the  principle  itself  is  practically  accepted  without 
further  discussion.  The  shortcomings  of  the  acts 
are  easily  explained  by  lack  of  familiarity,  on  the 
part  of  all  social  groups  concerned,  with  the  prob- 
lems at  issue.  Surely  in  no  other  way  can  be  ex- 
plained the  complacent  acceptance  by  the  wage- 
workers  of  such  preposterously  inadequate  laws  as, 
e.g.,  those  of  New  Jersey,  Colorado,  or  Pennsylvania. 

The  flood  of  literature  on  compensation  has  not 


INTRODUCTORY  S 

subsided,  but  has  acquired  a  deeper  character.  In- 
stead of  agitation,  there  is  inquiry ;  instead  of  popu- 
lar articles,  specialized  technical  studies.  Already 
the  formation  of  the  Casualty  Actuarial  and  Statis- 
tical Society  of  America  has  furnished  a  new  impor- 
tant medium  for  the  scientific  study  of  statistical 
and  insurance  problems  of  compensation  which  were 
scarcely  recognized  three  or  four  years  ago.1  With 
this  issue  practically  settled,  at  least  in  principle, 
the  attention  of  the  progressive  student  in  social 
legislation  may  be  centered  upon  other  correlated 
problems. 

Already,  the  first  steps  have  been  taken  toward 
creating  a  sentiment  in  favor  of  other  branches  of 
social  insurance.  The  First  American  Conference  on 
Social  Insurance,  held  in  Chicago  in  June,  1913 ;  the 
establishment  of  a  department  of  social  insurance  in 
the  Survey;  the  preparations  for  the  International 
Congress  on  Social  Insurance  in  Washington  (un- 
fortunately abandoned  because  of  the  outbreak  of  the 
Great  War)  ;  the  creation  of  a  Social  Insurance  Com- 
mission in  California  in  1915 — all  these  are  symp- 
toms of  the  new  movement.  Health  insurance  was  one 
of  the  main  subjects  of  discussion  before  the  meeting 
of  the  American  Association  for  Labor  Legislation 
in  Washington  in  December,  1913,  and  again  in 
December,  1915.  Old-age  pensions  and  insurance  have 
been  thoroughly  discussed  in  official  reports  in  Massa- 

1  See  Proceedings  of  the  Casualty  Actuarial  and  Statistical 
Society  of  America,  Vol.  I,  1914-15;  Vol.  II,  1915-16. 


4        STANDARDS  OF  HEALTH  INSURANCE 

chusetts  and  Wisconsin;  unemployment  insurance 
was  emphasized  in  the  recent  conferences  of  the 
American  Association  for  Labor  Legislation  held  in 
New  York  in  March,  1914,  and  in  Philadelphia  in 
December,  191-1.  And  scarcely  any  of  the  numerous 
unemployment  commissions  created  during  the  win- 
ters of  1913  and  1914  failed  to  point  at  compulsory 
unemployment  insurance  as  at  least  a  partial  remedy. 
How  far  mothers'  pension  laws  technically  consti- 
tute an  extension  of  social  insurance  methods,  is  still 
a  question  calling  forth  heated  discussion  among 
students  and  advocates  of  social  legislation  in  this 
country.  But  whatever  the  technical  aspect  of  these 
laws,  whatever  even  their  social  efficiency,  it  must  be 
admitted  that  the  adoption  of  acts  of  this  character 
by  twenty-odd  states  within  the  last  two  or  three 
years  is  an  important  victory  for  the  principle  of 
"  Soziale  Fiirsorge  "  or  "  Prevoyance  Sociale  "  which 
underlies  the  entire  social  insurance  jovement. 

It  is  impossible  to  prophesy  with  certainty  which 
one  of  these  branches  of  social  insurance  will  be  the 
next  one  to  be  taken  up  seriously  by  American  legis- 
latures. A  good  deal  often  depends  upon  sudden 
development  of  popular  interest  or  social  pressures; 
witness,  for  instance,  the  very  wide  interest  dis- 
played by  organized  labor  and  the  Socialist  party 
in  the  National  Old  Age  Pension  Bill  introduced  by 
the  first  Socialist  Congressman  Victor  L.  Berger, 
or  the  national  excitement  over  the  problem 
of  unemployment  in  the  winter  of  1914,  under 


INTRODUCTORY  5 

the  influence  of  the  picturesque  efforts  of  the 
I.W.W.  to  invade  the  churches  of  New  York  City. 
But  a  normal  development  of  the  social-insurance 
principle  would  seem  to  demand  that  the  next  step 
be  taken  in  the  domain  of  health  insurance. 

Several  reasons  for  this  may  be  mentioned.  Ad- 
mittedly unemployment  insurance  presents  many 
technical  difficulties  which  even  in  Europe  have  de- 
layed its  development. 

As  yet  the  British  experience  of  two  or  three  years 
is  the  only  fountain  of  information  to  be  drawn  upon. 
It  is  recognized  by  all  students  of  unemployment 
insurance  that  its  success  absolutely  depends  upon 
a  comprehensive  network  of  public  employment  offices 
or  labor  exchanges,  and  it  is  urged  by  many  that  these 
be  established  and  roughly  organized  before  the  more 
complicated  problems  of  insurance  are  undertaken. 

In  the  problem  of  old-age  provision  we  are  neces- 
sarily confronted  by  the  antagonism  (perhaps  more 
seeming  than  real)  between  the  principle  of  insurance 
and  the  principle  of  gratuitous  governmental  pen- 
sions, which  will  delay  legislative  action  for  some 
time,  especially  in  view  of  the  growing  popularity 
of  the  pension  principle  among  organized  workers. 
No  such  serious  difficulties  prevent  the  development  of 
health-insurance  legislation. 

The  precedents,  not  only  of  continental  Europe, 
but  of  Great  Britain  as  well,  offer  a  reasonable  argu- 
ment. There  is  a  material  basis  for  legislation  in 
the  existence  of  voluntary;  health-insurance  organiza- 


6        STANDARDS  OF  HEALTH  INSURANCE 

tions  of  various  types,  and  in  the  abuses  discovered 
in  connection  with  a  certain  type  of  commercial 
health  insurance. 

The  practical  application  of  the  various  compen- 
sation acts  has  brought  to  the  surface  the  difficulty 
of  differentiating1  between  industrial  accident  and  oc- 
cupational disease,  and  between  the  latter  and  simple 
illness.  The  extension  of  the  concept  of  industrial 
accident  to  all  physical  injuries  (whether  traumatic 
or  pathologic)  in  several  acts  through  legislative  in- 
tent or  judicial  construction  has  pointed  the  way  to 
general  health  insurance  as  the  only  way  of  meeting 
the  problems  arising  from  these  difficulties  of  draw- 
ing the  hard  and  fast  line  between  accident  and 
disease. 

But  perhaps  the  most  important  consideration  is 
the  quantitative  one.  Professional  workers  of  relief 
agencies  have  long  recognized  that  sickness  represents 
the  most  frequent  factor  of  individual  destitution. 
The  growth  of  the  various  health  and  life  conserva- 
tion movements,  the  concerted  attack  upon  excessive 
child  mortality,  the  alarming  increase  in  diseases 
of  middle  age,  and  the  mortality  caused  by  them,  the 
increased  scientific  activity  in  the  study  of  industrial 
hygiene,  all  these  various  forms  of  scientific  and 
social  endeavor  have  brought  to  light  not  only  the 
social  waste  caused  by  excessive  and  preventable  ill- 
ness but  also  the  economic  conditions  which  are  re- 
sponsible for  them.  Even  minimum  wage  legislation 
and  the  statistical  inquiries  undertaken  in  connection 


INTRODUCTORY  7 

with  it  have  added  eloquent  evidence  of  the  need  of 
some  systematic  social  effort  to  protect  the  health  of 
the  wage-workers.  The  Social  Insurance  Committee 
of  the  American  Association  for  Labor  Legislation, 
organized  in  1912,  and  perhaps  the  most  influential 
organization  in  this  field,  was  soon  forced  to  shift 
from  problems  of  compensation  to  those  of  health 
insurance.  Many  other  committees  and  commissions, 
of  relief  societies,  reform  or  industrial  organiza- 
tions, and  of  medical  societies  are  studying  the  prob- 
lem and  preparing  statistical  material.  Already  bills 
have  been  introduced  in  the  legislatures  of  New  York, 
New  Jersey,  and  Massachusetts  and  perhaps  other 
states. 

In  short,  health  insurance  is  at  present  going 
through  the  same  stage  which  accident  compensation 
went  through  six  or  seven  years  ago.  Perhaps  a 
growth  at  similar  speed  may  reasonably  be  hoped  for, 
but  the  same  or  similar  difficulties  must  be  expected 
and,  if  possible,  some  of  them  should  be  prevented. 

The  bewildering  variety  of  plans,  systems,  methods, 
and  provisions  of  workmen's  compensation  found  in 
the  acts  already  passed  may  be  defended  on  the 
ground  that  the  country  has  been  divided  into  so 
many  experimental  laboratories,  in  which  the  various 
products  of  ingenuity  are  being  tried  out,  with  the 
hope  that  the  best  plan  will  win  in  the  end. 

But  after  all  it  must  not  be  forgotten  that  fre- 
quently it  is  a  very  painful  process  of  human  vivisec- 
tion, and  that  many  of  these  experiments  are  so 


8        STANDARDS  OF  HEALTH  INSURANCE 

poorly  planned  that  it  is  very  difficult  to  justify  them 
from  a  scientific  point  of  view.  Our  numerous  and 
varied  compensation  acts  not  only  contain  many 
provisions  eminently  unjust,  but  too  frequently  show 
a  very  poor,  almost  inexcusably  faulty  technique  of 
construction.  Many  errors  have  been  committed 
which  but  repeat  the  errors  of  the  early  history  of 
the  compensation  movement  in  Europe,  and  others 
which  nothing  but  the  grossest  ignorance  of  the  un- 
derlying problem  can  explain.  Time  and  habit  give 
sanction  to  the  worst  errors  of  inefficient  lawmaking, 
and  we  are  perhaps  farther  away,  at  least  for  the 
time  being,  from  efficient  uniformity  in  compensa- 
tion legislation  than  we  were  two  or  three  years  ago. 

There  seems  only  one  way  in  which  similar  con- 
fusion in  the  other  fields  of  social  insurance,  as  they 
develop  in  this  country,  may  be  prevented  or  at  least 
mitigated,  and  that  is  careful  discussion  of  the  basic 
principles  during  the  preliminary  stages  of,  and  side 
by  side  with,  the  propaganda  which  must  prepare 
the  ground  for  legislation. 

An  effort  is  made  in  the  following  pages  to  sketch 
the  outline  of  the  basic  principles  underlying  a  broad 
system  of  health  insurance,  with  the  hope  that  it  will 
be  of  some  assistance  to  those  who  are  trying  to 
preach  or  teach  it  to  public  opinion,  or  who  have 
gone  so  far  as  to  prepare  drafts  of  legislative  en- 
actments. In  developing  these  principles  the  writer 
did  not  venture  to  draw  too  much  upon  his  con- 
structive imagination,  though  he  is  ready  to  admit 


INTRODUCTORY  9 

that  such  "  social  invention,"  as  it  has  been  recently 
called,  is  very  necessary  and  perhaps  essential. 
Whenever  such  "  social  invention  "  is  undertaken,  im- 
mediately the  land  of  doubt  is  reached  and  perhaps 
it  would  seem  wiser  and  safer  not  to  venture  into  it 
alone.  But  the  wealth  of  European  experience  has 
already  established  some  fairly  well-defined  dicta,  and 
at  least  through  their  study  serious  errors  of  legisla- 
tion may  be  prevented. 

It  is  not  the  intention  of  the  writer  to  develop  at 
this  place  a  lengthy  argument  in  support  of  the  basic 
thesis  of  health  insurance.  This  has  already  been 
done  in  his  larger  work  on  Social  Insurance  2  and 
elsewhere,  as  well  as  by  many  other  students  within 
the  last  two  or  three  years,3  and  a  reference  to  the 
works  cited  will  furnish  material  for  such  argument. 
Besides,  public  or  social  health  insurance  is  a  com- 

*  See  especially  chap,  i,  "  The .  Concept  of  Social  Insurance," 
and  chap,  xiii,  "  Economic  and  Industrial  Aspects  of  Dis- 
ease "  5  see  also  his  paper  on  "  Sickness  Insurance,"  "  Proceed- 
ings of  the  First  American  Conference  on  Social  Insurance " 
(American  Labor  Legislation  Review,  Vol.  Ill,  No.  2). 

8  See  especially  "  The  Practicability  of  Compulsory  Sickness 
Insurance  in  America,"  by  J.  P.  Chamberlain  (American 
Labor  Legislation  Review,  Vol.  IV,  No.  1),  and  the  papers 
read  at  the  9th  Annual  Meeting  of  the  American  Association 
for  Labor  Legislation,  held  in  Washington,  Dec.,  1915,  espe- 
cially "Social  Cost  of  Sickness,"  by  Dr.  Haven  Emerson; 
"  Organization  of  Medical  Service,"  by  Dr.  M.  M.  Davis,  and 
"Plan  for  a  Health  Insurance  Act,"  by  Professor  H.  R. 
Seager.  Also  "  Health  Insurance :  Its  Relation  to  the  Public 
Health."  By  B.  S.  Warren  and  E.  Sydenstriker  (U.  S. 
Public  Health  Service,  Public  Health  Bulletin  No.  76). 


10      STANDARDS  OF  HEALTH  INSURANCE 

plex  concept,  embodying  numerous  elements,  such  as 
compulsion,  regulation,  state  subsidy,  etc.,  etc.,  and 
since  the  arguments  for  or  against  health  insurance 
(or  any  other  measure  of  legislation)  usually  as- 
sume the  form  of  advocacy  or  criticisms  of  various 
features  of  the  measure  proposed  these  will  all  nec- 
essarily be  dealt  with  at  some  length  in  the  discus- 
sion of  individual  standards. 

It  may  be  desirable,  however,  for  the  benefit  of  the 
busy  reader,  who  cannot  spare  time  to  refer  to  other 
sources,  to  state  here  very  briefly  the  essential  con- 
siderations underlying  the  propaganda  for  health  in- 
surance in  this  country. 

1.  Illness  is  a  "  risk  "  or  "  hazard,"  i.e.,  repre- 
sents a  possible  economic  loss,  which  threatens  every 
human  being.     Since  "  insurance  is  a  provision  made 
by  a  group  of  persons,  each  singly  in  danger  of  some 
loss,  the  incidence  of  which  cannot  be  foreseen,  that 
when  such  loss  shall  occur  to  any  of  them,  it  shall  be 
distributed  over  the  whole  group  " — insurance  is  evi- 
dently a  method  well  adopted  to  mitigate  the  destruc- 
tive effects  of  illness. 

2.  The  wage-worker  stands   in  greater  need  of 
health  insurance,  because:  first,  his  economic  status 
depends    much   more   closely   upon   preservation   of 
health ;  second,  as  a  result  of  the  unhygienic  or  harm- 
ful conditions  of  his  life  and  work,  he  is  very  much 
more  susceptible  to  ill  health,  than  the  members  of 
the  employing  or  all  property-owning  classes. 


INTRODUCTORY  11 

3.  The  advantages  of  health  insurance  are  clearly 
demonstrated  by  the  rapid  extension  of  private  health 
insurance  of  various   forms,  commercial  as  well  as 
mutual. 

4.  The  experience  of  Europe  demonstrates  that 
public   concern  in  health  insurance  for  the  wage- 
working  class   is   almost  universal  in  all   industrial 
countries.     Practically  every  European  country  has 
some  system  of  sickness  or  health  insurance,   and 
compulsory  health  insurance  for  the  wage-workers 
has  already  been  introduced  in  Germany,  Austria, 
Hungary,    Luxemburg,    Norway,    Great     Britain, 
Servia,    Russia,    Roumania,    and    Holland.      This 
should   offer   sufficient,  evidence   that   social   health 
insurance  is  not  a  whim  or  fad,  but  a  definite  step 
in  the  development  of  labor  and  social  legislation. 

But  against  all  these  arguments  the  still  popular 
plea  is  advanced  that  European  conditions  do  not 
offer  a  fair  measure  of  conditions  in  the  United 
States,  and  that  the  solutions  of  economic  problems 
which  Europe  has  tried  and  found  effective  may  not 
at  all  fit  us,  that  this  blind  imitation  of  European 
remedies  is  highly  dogmatic  and  demonstrates  lack  of 
familiarity  with  the  ideals  of  American  life.  The 
proposals  for  compulsory  health  insurance  of  the 
wage-workers  made  in  several  states  have  been  char- 
acterized as  an  "  Un-American  doctrine." 

4 "  The  Un-American  Doctrine  of  State  Compulsory  Health 
Insurance,"  by  T.  L.  Thompson,  Economic  World,  March  4, 
1916. 


12      STANDARDS  OF  HEALTH  INSURANCE 

What  then  are  the  peculiar  features  of  American 
life  which  would  make  this  well-nigh  universal  move- 
ment of  the  industrial  era  utterly  inapplicable  here? 
The  plea  that  compulsion  is  undemocratic,  paternal- 
istic, socialistic  and  what  not,  will  be  dealt  with  in 
its  proper  place,  when  the  principle  of  compulsion  is 
considered.  But  still  more  insistent,  on  one  hand,  is 
the  claim  that  the  guiding  principle  of  American  life 
requires  a  standard  of  wages  sufficiently  high  to  en- 
able the  wage-worker  to  meet  all  the  necessary  losses 
of  illness,  such  as  the  cost  of  medical  aid,  out  of  his 
own  earnings,  and  on  the  other,  the  assertion  that 
American  wages  actually  have  that  level.  As  Mr. 
Thompson  puts  it  energetically,5  "  the  condition  of 
employees  in  the  United  States  does  not  warrant  the 
enactment  of  such  a  plan." 

The  reasons  for  this  attitude  of  this  and  simi- 
lar writers,  who  represent  commercial  insurance 
interests,  will  be  dealt  with  elsewhere.  It  is  sufficient 
to  point  out  at  this  juncture  that  the  numerous 
studies  of  the  economic  conditions  of  the  American 
wage-worker  do  not  at  all  justify  any  such  optimism. 
That  wages  in  the  United  States  as  a  rule  have 
a  higher  monetary  value  than  the  corresponding 
wages  in  Europe  may  be  readily  admitted.  But  the 
numerous  investigations  made  in  connection  with 
workmen's  compensation,  with  minimum  wage  leg- 
islation, and  so  forth,  have  demonstrated  a  very  fre- 

•  See  Economic  World,  March  4,  1916. 


INTRODUCTORY  13 

quent  lack  of  correspondence  between  customary 
earnings  and  necessary  minimum  expense. 

Professor  Scott  Nearing's  conclusion  that  "  half 
of  the  adult  males  working  in  the  industrial  sections 
of  the  United  States  receive  less  than  $600  per  year, 
three-quarters  are  paid  less  than  $750  annually," 
and  further  "  that  half  of  the  women  fall  below  $400  a 
year,  while  nearly  nine-tenths  receive  less  than  $750,"  6 
making  no  deduction  for  unemployment,  have  been 
given  wide  publicity.  They  have  been  charged  with 
undue  exaggeration.  But  waiving  aside  questions  of 
statistical  accuracy,  the  general  conception  concern- 
ing the  customary  level  of  American  wages,  and  espe- 
cially American  annual  earnings  seems  to  be  grossly 
misleading. 

The  country  was  recently  flooded  with  statements 
emanating  from  an  organization  of  Western  railroad 
companies  concerning  the  very  high  wages  of  engi- 
neers and  trainmen.  But  the  condition  governing  these 
exceptional  trades  must  not  be  assumed  without  fur- 
ther inquiry  to  apply  to  American  industry  at  large. 
Another  serious  student  of  wages  arrived  at  the  con- 
clusion that  in  1911,  "  at  least  half  of  the  males  aged 
sixteen  or  more,  engaged  in  gainful  occupations  were 
earning  less  than  $626  a  year."  7  The  wage  data  in 
the  United  States  are  very  fragmentary;  they  are 
published  by  a  multiplicity  of  permanent  institutions, 

•  Scott  Nearing,  Wages  in  the  United  States,  p.  213. 
T  Frank  Hatch  Streightoff,  The  Distribution  of  Incomes  in 
the  United  States,  p.  152. 


14      STANDARDS  OF  HEALTH  INSURANCE 

governmental  and  private,  by  special  investigating 
bodies,  and  by  private  students.  This  is  no  place  to 
go  into  an  exhaustive  study  of  the  data,  which  has 
already  been  and  is  being  done  by  other  students. 
But  that  the  earnings  of  the  most  unskilled  and  cer- 
tain semi-skilled  trades  and  occupations  are  not  suffi- 
cient to  provide  for  a  decent  family  standard  is  now 
generally  admitted  by  most  persons  familiar  with 
actual  conditions.  At  the  hearing  on  a  Health  In- 
surance bill  held  before  a  legislative  committee  at  Al- 
bany on  March  14, 1916,  Mr.  B.  B.  Burritt,  director 
of  the  New  York  Association  for  Improving  the  Con- 
dition of  the  Poor,  testified  that  a  family  of  2  adults 
and  3  children  needs  at  least  $56  a  month  for  the 
barest  necessaries  of  life,  which  is  more  than  the 
ordinary  unskilled  laborer  can  expect  to  earn,  so  that 
no  margin  is  left  for  any  emergency,  including  sick- 
ness. 

The  conclusions  to  which  the  writer  came  some 
years  ago,  may  perhaps  once  more  be  stated  here.8 

1.  From  two-thirds  to  three-fourths  of  all  pro- 
ductive workers  in  the  United  States  depend  upon 
wages  or  small  salaries  for  their  existence. 

2.  From  four-fifths  to  nine-tenths  of  the  wage- 
workers  receive  wages  which  are  insufficient  to  meet 
the  cost  of  a  normal  standard  of  health  and  efficiency 
for  a  family,  and  about  one-half  receive  very  much 
less  than  that. 

'Social  Inturance,  pp.  43-44. 


INTRODUCTORY  15 

3.  If    a    certain    proportion    of    wage-workers' 
families  succeed  in  attaining  such  a  standard,  it  is 
made  possible  only  by  the  presence  of  more  than  one 
worker  in  this  family.     This  condition,  however,  can 
only  be  temporary  in  the  history  of  any  working- 
man's  family. 

4.  An  annual  surplus  in  the  workingman's  budget 
is  a  very  rare  thing,  and  is  very  small. 

5.  The  growth  of  savings-bank  deposits   in  the 
United  States  is  not  sufficient  evidence  of  the  ability 
of  the  American   workingman   to  make   substantial 
savings.    A  large  proportion  of  these  savings  belongs 
to  other  classes  of  population,  and  in  so  far  as  in- 
formation   is    available,    the    average   workingman's 
deposits  are  very  small. 

While  these  are  all  statements  of  static  conditions, 
the  investigation  of  the  dynamics  of  the  condition  of 
the  wage-working  class  leads  to  even  more  striking 
facts.  It  is  but  too  often  complacently  assumed  that 
the  rise  of  American  wages  offers  an  almost  auto- 
matic corrective  to  all  economic  problems  of  the 
wage-worker's  existence.  The  point  involved  is  of 
such  tremendous  importance  for  the  basic  motive  of 
our  entire  social  policy  that  a  careful  and  painstak- 
ing inquiry  was  undertaken  by  the  writer  some  two 
years  ago.9 

A  comparison  of  wages  and  retail  prices  from 
1890  to  1912  led  to  the  following  conclusions,  at 

•See  "The  Recent  Trend  of  Real  Wages,"  American 
Economic  Review,  Vol.  IV,  No.  4,  Dec.,  1914. 


16      STANDARDS  OF  HEALTH  INSURANCE 

present  universally  accepted  by  various  shades  of 
economic  opinion :  10 

*'  In  years  of  falling  or  even  slowly  rising  prices, 
the  American  wage-worker  was  able  to  hold  his  own 
or  to  improve  his  condition  to  a  slight  extent.  But 
when  confronted  with  a  rapidly  rising  price  movement 
(accompanied  as  it  was  by  a  violent  growth  of 
profits)  the  American  wage-worker,  notwithstanding 
his  strenuous  effort  to  adjust  wages  to  these  new 
price  conditions,  notwithstanding  all  his  strikes,  boy- 
cotts, and!  riots,  notwithstanding  all  this  picturesque 
I.W.W.-ism,  new  unionism,  and  the  modish  sabotage, 
has  been  losing  surely  and  not  even  slowly,  so  that  the 
sum  total  of  economic  progress  of  this  country  for 
the  last  quarter  of  a  century  appears  to  be  a  loss 
of  from  10  to  15  per  cent  in  his  earning  power." 

The  growing  demand  for  a  constructive  and  a 
protective  social  policy  toward  the  American  wage- 
worker  is  therefore  not  a  fad  or  a  fancy.  What- 
ever the  reasons  may  have  been  for  America  lag- 

10  See  Professor  John  Gray,  "  Economics  and  the  Law  "  (Ad- 
dress of  the  President),  Proceedings,  27th  Annual  Meeting 
of  the  American  Economic  Association,  1914,  p.  18;  Professor 
Walter  E.  Clark,  The  Cost  of  Living  (1915),  pp.  107- 
108;  W.  E.  Walling,  "Who  Gets  America's  Wealth,"  Inter- 
collegiate Socialist,  Vol.  IV,  No.  2,  Dec.,  1915;  New  Review, 
Oct.,  1915;  D.  H.  L.  Weld,  Marketing  of  Farm  Products; 
Professor  E.  D.  Durand  in  his  Presidential  Address  before 
the  American  Statistical  Association,  Dec.,  1915;  Professor 
W.  Jett  Lauck,  in  Locomotive  Engineers'  Monthly  Journal, 
1915;  B.  S.  Warren  and  E.  Sydenstriker,  loc.  cit., 
pp.  43-44. 


INTRODUCTORY  17 

ging  behind  Europe  in  matters  of  social  legislation, 
and  particularly  that  branch  of  it  dealing  with  social 
insurance,  these  reasons  are  rapidly  vanishing.  If 
the  harmful  effects  of  the  increasing  cost  of  living 
will  be  counteracted,  if  organized  society  intends  to 
undertake  a  serious  campaign  for  prevention  of  desti- 
tution, if  finally  the  movement  for  conservation  of  the 
health  of  the  nation  is  to  have  any  meaning  at  all, 
then  health-insurance  legislation  becomes  the  burning 
issue  of  the  hour. 


II 

THE  PRINCIPLE  OF  COMPULSION 

IN  drawing  references  from  European  experience  it 
will  be  sufficient  to  keep  in  mind  the  main  types,  and 
for  this  purpose  three  countries  have  been  selected, 
representing  the  three  distinct  and  perhaps  most  im- 
portant types.  These  countries  are  Germany,  Great 
Britain,  and  Denmark.  Of  course,  this  will  not  pre- 
vent more  or  less  frequent  references  to  the  experi- 
ence of  many  other  European  countries,  in  which 
social  health  insurance  has  been  in  existence  for  many 
years,  such  as  Austria,  Hungary,  Russia,  Switzer- 
land, Norway,  or  others. 

The  systems  of  Germany  and  Great  Britain  are  at 
present  the  two  most  important  systems  of  health  in- 
surance, both  being  compulsory  but  with  the  impor- 
tant difference  that  Germany  not  only  prescribes  the 
obligation  to  insure,  but  also  indicates  the  insur- 
ance-carrier, while  the  British  system  leaves  the  se- 
lection of  the  insurance-carrier  to  the  free  choice  of 
the  insured.  Denmark  has  perhaps  the  best  voluntary 
system  of  sickness  insurance  in  Europe,  and  has  been 
selected  for  this  reason. 

The  three  types  represented  by  these  three  coun- 
tries may  be  described  as  follows :  ( 1 )  voluntary  in- 

18 


THE  PRINCIPLE  OF  COMPULSION        19 

surance  with  state  subsidies  (Denmark)  ;  (2)  com- 
pulsory insurance  with  a  practically  prescribed 
insurance-carrier  (Germany);  (3)  compulsory  in- 
surance with  freedom  of  choice  of  insurance-carrier 
(Great  Britain). 

The  crucial  question  which  demands  an  answer 
at  the  very  outset  is  whether  a  voluntary  or 
a  compulsory  system  is  contemplated.  Almost  all 
other  provisions  of  the  system  depend  upon 
this. 

Voluntary  insurance  against  sickness,  as  against 
accidents  or  other  emergencies,  exists  as  a  spontane- 
ous growth  in  this  country  as  in  almost  all  others. 
Both  the  commercial  and  the  mutual,  co-operative 
forms  are  well  known.  When,  however,  voluntary 
insurance  is  spoken  of  in  connection  with  social- 
insurance  problems,  something  more  than  platonic  in- 
dorsement of  existing  provisions  for  voluntary  insur- 
ance is  meant.  It  is  assumed  that  the  state  must 
take  some  definite  steps  to  stimulate  and  encourage, 
or  at  least  to  control  and  protect,  these  spontaneous 
efforts.  If  compulsion  is  rejected,  the  choice  is  left 
between  various  degrees  of  assistance  and  guidance 
of  the  voluntary  systems  by  governmental  authority. 

Accordingly,  three  systems  of  sickness  insurance 
may  be  recognized  in  Europe,  placed  here  in  the 
logical  order  of  development  toward  a  comprehen- 
sive system  rather  than  in  strict  chronological 
sequence:  (1)  voluntary  insurance,  regulated  by 
state  authority;  (2)  voluntary  insurance  with  sub- 


20      STANDARDS  OF  HEALTH  INSURANCE 

stantial  state  subsidies  in  addition  to  regulation  and 
control;  and  (3)  compulsory  insurance. 

In  comparing  these  three  systems,  the  first  note- 
worthy fact  is  the  strong  and  increasing  tendency 
toward  compulsory  insurance  throughout  Europe.  Be- 
ginning with  the  German  system  established  in  1884, 
no  less  than  ten  European  countries  have  estab- 
lished systems  of  compulsory  sickness  insurance  for 
all  or  most  of  their  wage-workers : 

Germany    1884 

Austria 1 888 

Hungary    1891 

Luxemburg    1901 

Norway    1909 

Servia 1910 

Great  Britain    191 1 

Russia    1912 

Roumania 1912 

Netherlands    1913 

In  addition  many  other  countries,  not  popularly 
credited  with  compulsory  systems  of  social  insur- 
ance, nevertheless  have  such  systems  for  certain 
groups  of  wage-workers  (largely  those  employed  in 
mining,  railroading,  and  navigation)  in  virtue  of  spe- 
cial legislative  enactments  (Belgium,  Italy,  France, 
and  Spain).  Subsidized  voluntary  insurance  against 
sickness  may  be  said  to  exist  in  five  countries  only: 
Sweden,  Denmark,  Belgium,  France,  and  Switzerland. 
The  most  important  systems  are  those  of  Denmark 


THE  PRINCIPLE  OF  COMPULSION        21 

and  Switzerland.  That  of  the  latter,  however,  is  still 
in  the  making,  though  the  act  was  passed  in  June, 
1911,  and  the  Danish  presents  the  highest  develop- 
ment of  this  form  of  social  insurance  at  present. 
The  purely  platonic  attitude  of  regulation  persists 
in  a  very  few  European  countries  only.  Great 
Britain,  Switzerland,  and  Holland  have  abolished  it 
within  the  last  half-decade.  Italy  and  Belgium  (and 
perhaps  France)  may  be  included  in  this  group. 

The  lesson  of  history  is  therefore  strongly  in  favor 
of  the  compulsory  principle  in  this  branch  of  social 
insurance.  Evidence  to  that  effect  has  been  strength- 
ened within  the  last  few  years.  After  the  organiza- 
tion of  the  first  two  or  three  compulsory  systems  in 
the  early  eighties,  there  seems  to  have  been  a  twenty- 
year  period  of  testing  the  experiment.  As  a  result  of 
this  test  the  years  1909-13  have  brought  six  new 
national  compulsory  sickness-insurance  systems  in 
Europe. 

What  considerations  have  brought  about  this  vic- 
tory of  the  compulsory  principle? 

1.  The  demonstrated  inability  to  bring  the  needi- 
est strata  of  the  working  class  into  the  system  by  any 
measures  short  of  compulsion.  Under  all  voluntary 
systems  the  proportion  of  the  insured  in  a  definite 
labor  group  is  in  inverse  ratio  to  its  economic  status. 
Ability  and  willingness  to  meet  the  cost  of  insurance 
presuppose  the  existence  of  some  surplus  in  the 
budget  and  a  sufficient  cultural  status  for  the  appre- 
ciation of  the  advantages  of  the  insurance  principle. 


22      STANDARDS  OF  HEALTH  INSURANCE 

Both  are  least  present  in  the  lower  strata  of  the  wage- 
working  class  where  disease  is  most  frequent  and  the 
economic  need  caused  by  disease  greatest.  Experi- 
ence has  proved  that  only  by  compulsion  can  these  be 
reached. 

In  Germany,  i.e.,  the  proportion  of  the  population 
compulsory  insured  in  1911  was  as  follows: 

Population  Insured  Per  cent 

Males    32,000,000  10,300,000         32.2 

Females    32,900,000  3,660,000         11.1 

Total 64,900,000  13,960,000         21.5 

It  is  also  estimated  that  the  further  extension  of 
the  German  compulsory  insurance  system  through 
the  act  of  1911  has  extended  the  system  over  an  addi- 
tional 5,000,000  by  including  farm  laborers,  domes- 
tic servants,  and  a  few  other  groups,  so  that  the 
proportion  would  be  over  30  per  cent. 

In  the  United  Kingdom  the  number  insured  ex- 
ceeds 14,000,000  in  a  population  of  some  45,000,000, 
or  a  percentage  of  81,  the  proportion  of  insured  men 
being  about  50  per  cent  and  that  of  insured  women 
about  20  per  cent. 

As  against  these  imposing  figures  the  proportion 
of  insured  workmen  under  even  a  liberally  subsidized 
system  is  considerably  smaller.  In  France  the  total 
number  of  adult  persons  insured  in  the  "  societes  de 
secours  mutuels  "  does  not  exceed  4,000,000  or  10 
per  cent.  In  Belgium,  with  a  population  of  7,500,- 
000,  the  total  membership  of  similar  organizations 


THE  PRINCIPLE  OF  COMPULSION        23 

did  not  exceed  half  a  million,  or  6  per  cent.  In  Italy 
the  proportion  is  about  3  to  4  per  cent,  and  in  Spain 
less  than  1  per  cent. 

A  striking  exception  to  this  rule  is  presented  by 
the  experience  of  Denmark,  where  the  voluntary  sys- 
tem, carefully  nurtured  by  government  supervision 
and  substantial  subsidy,  has  succeeded  in  drawing 
into  the  voluntary  system  a  very  substantial  propor- 
tion of  the  population  of  that  little  country,  as  the 
following  figures  for  1914  will  show: 

Population  Insured  Per  cent. 

Males 1,338,000  401,800         30.0 

Females    1,419,000  444,400         31.1 

Totals    2,757,000  843,200         3O5 

It  must  be  pointed  out,  however,  that  half  of  the 
insured  persons  are  women,  most  of  them  wives  of 
insured  men,  while  in  Germany  the  insurance  usually 
carries  with  it  at  least  medical  benefits  for  wife  and 
family,  so  that  in  reality  the  percentage  of  insured 
families  is  still  smaller  in  Denmark  than  in  Ger- 
many. 

But  granting  the  splendid  numerical  development 
of  subsidized  insurance  in  Denmark,  it  does  not  fol- 
low that  what  is  possible  in  such  a  small  and  com- 
pact community  (and  then  after  25  years  of  develop- 
ment) could  be  easily  realized  in  a  vast  country  like 
ours. 

2.  Shifting  the  burden  of  insurance.  A  study  of 
the  social  causes  of  disease  establishes  at  least  a  par- 


24      STANDARDS  OF  HEALTH  INSURANCE 

tial  responsibility  for  illness  on  the  part  of  industry 
and  society.  Justice  would  require  that  industry  and 
society  should  share  in  the  cost  of  health  insurance. 
But  besides  this  argument  of  abstract  equity,  there 
is  the  economic  fact  that  for  a  large  proportion  of 
the  wage-workers  the  earnings  are  such  as  to  make 
the  cost  of  insurance  too  heavy  a  burden.  Both 
equity  and  necessity  require  that  at  least  part  of 
this  burden  be  shared  by  other  classes  of  society. 
The  subsidized  voluntary  system  recognizes  this,  and 
endeavors  to  relieve  the  burden  by  a  state  or  local 
governmental  subsidy.  But  only  through  a  compul- 
sory system  does  it  become  possible  to  shift  part  of 
the  cost  upon  the  employer  and  upon  industry  at 
large.  The  essential  feature  of  compulsion  is  exer- 
cised upon  the  employer  who  is  forced  to  meet  part 
of  the  cost. 

3.  Standardization  of  the  insurance  service.  Not 
only  the  quantitative,  but  also  the  qualitative,  de- 
velopment of  the  insurance  system  must  be  considered. 
It  is  important,  not  only  that  all  strata  of  working- 
men  be  insured,  but  that  the  services  rendered  by  the 
insurance  institutions  be  effective  and  capable  of 
meeting  the  problems  which  call  for  health  insur- 
ance. Under  a  subsidized  system  an  effort  is  usually 
made  to  accomplish  this  result  by  exacting  certain 
conditions  before  the  subsidy  is  granted.  This 
method  has  reached  its  highest  development  under 
the  Swiss  law.  But,  at  best,  the  requirements  of  a 
voluntary  system  cannot  be  far  above  the  actual 


THE  PRINCIPLE  OF  COMPULSION        25 

practice  of  the  organizations  existing  at  the  time, 
or  otherwise  it  is  in  danger  of  failing  entirely.  Thus, 
even  in  Denmark  the  quality  of  service  is  not  always 
satisfactory,  and  is  usually  below  that  of  the  com- 
pulsory systems,  as  will  appear  from  the  detailed 
analysis  of  various  provisions  in  the  following  pages. 
On  the  other  hand,  both  Germany  and  Great  Britain 
present  and  enforce  definite  minimum  requirements, 
which  are  adjudged  practical  and  necessary,  while  the 
very  contribution  from  industry  makes  a  higher 
minimum  possible. 

As  against  these  advantages  the  system  of  com- 
pulsion is  violently  attacked  on  many  counts.  That 
such  attacks  should  be  made  when  the  principle  of 
compulsion  is  first  suggested  seems  quite  natural.  In 
the  very  nature  of  things  compulsion  must  be  resented 
in  a  democratic  country  and  needs  to  be  justified. 
The  objection  to  compulsion  is  therefore  shrewdly 
utilized  by  all  interests  opposed  to  the  basic  prin- 
ciple of  social  insurance.  We  expect,  therefore,  pri- 
vate commercial  insurance  to  oppose  the  principle  of 
compulsion  as  utterly  un-American,  because  it  fears 
in  social  insurance  a  powerful  competitor.  We  may 
expect  representatives  of  employing  capital  to  pro- 
test violently  against  this  interference  with  the  con- 
stitutional right  of  their  employees,  because  they  do 
not  welcome  the  additional  charge  upon  their  own 
profits  which  the  system  invariably  carries.  We  are 
not  surprised  even  when  fraternal  insurance — in  it- 
self a  valuable  form  of  social  insurance — lodges  its 


26      STANDARDS  OF  HEALTH  INSURANCE 

protest  against  compulsion  because  of  its  possible 
interference  with  the  further  development  of  the 
voluntary  form  of  insurance.  In  all  these  and  other 
cases  we  are  dealing  with  definite  interests  rather  than 
political  ideas,  and  even  if  the  latter  are  at  all  sin- 
cere they  are  inevitably  influenced  by  the  former. 
But  as  a  matter  of  fact,  antagonism  to  compulsion 
is  found  to  some  extent  even  among  the  wage-workers 
who  are  the  chief  beneficiaries  of  the  plan.  The  argu- 
ments against  compulsion  must  therefore  be  earnestly 
reckoned  with. 

What  creates  antagonism  to  compulsory  insurance 
is  the  implied  restriction  of  individual  liberty. 
"  I  am  going  to  be  my  own  judge  whether 
I  am  going  to  be  insured  against  sickness 
or  anything  else,  and  if  at  all  where  and  when 
and  under  what  terms "  many  an  American 
workman  argues.  "  It  is  nobody's  business  but  my 
own." 

A  spokesman  for  commercial  insurance  interests 
puts  the  same  argument  into  more  eloquent  English. 
"  If  any  citizen  can  by  law  be  compelled  to  carry 
health  insurance  and  pay  therefor  a  part  of  his 
earnings,  he  can  be  compelled  under  the  same  prin- 
ciple of  legislation  to  do  anything  else  and  pay  the 
cost  out  of  his  hard  earnings,  if  somebody  else  thinks 
it  will  be  beneficial  to  him.  Such  a  doctrine  is  abso- 
lutely destructive  of  a  man's  rights  to  do  or  not  to  do 
whatever  his  judgment  may  dictate  as  to  matters  that 
solely  affect  him  personally.  It  is  the  exercise  of 


THE  PRINCIPLE  OF  COMPULSION        27 

absolute  and  arbitrary  governmental  power  over  the 
individual." 

Of  course  the  power  is  denied  by  this  and  many 
other  writers  on  constitutional  grounds.  It  is  not 
the  intention  of  the  writer,  who  claims  no  standing 
as  an  authority  in  Constitutional  law,  to  argue  the 
question  of  constitutionality  at  this  place.  For  this 
legal  aspect  of  the  question  the  reader  is  referred 
to  the  appendix,  where  an  authoritative  statement  by 
an  expert  will  be  found.  But  it  is  sufficient  at  this 
time  to  point  out  that,  in  colloquial  English,  "  You 
can  lead  a  horse  to  water,  but  you  cannot  make  him 
drink."  All  the  compulsion  that  is  exercised  over  the 
wage-worker  in  the  final  analysis  resolves  itself  into 
a  money  charge — somewhat  akin  to  a  tax.  The  bene- 
fits of  the  health  insurance  system  will  not  be  pressed 
upon  him  by  force,  and  the  power  of  the  state  to 
impose  taxes  is  fairly  well  admitted.  But  is  there 
really  an  entirely  new  principle  of  governmental  au- 
thority involved?  The  principle  of  compulsory  edu- 
cation, or  compulsory-  vaccination,  after  all  repre- 
sents a  much  more  substantial  interference  with  per- 
sonal liberty  for  considerations  imposed  upon  the 
individual  from  the  outside.  Nor  is  the  principle  of 
compulsory  insurance  at  all  new  and  lacking  in 
precedents  in  this  country.  In  a  number  of  states, 
as,  for  instance  New  York,  Ohio,  Washington,  and 
several  others,  compulsory  insurance  of  accident  com- 

1 T.  L.  Thompson,  The  Economic  World,  March  4,  1916, 
p.  315. 


28      STANDARDS  OF  HEALTH  INSURANCE 

pensation  is  forced  upon  the  employer,  and  that  only 
partly  for  his  own  good,  and  partly  for  the  good  of 
his  employees.  The  compulsion  to  insure  (and,  in 
both  Washington  and  Ohio,  to  insure  with  a  certain 
insurance-carrier)  is  independent  of,  and  additional 
to,  the  legal  obligation  to  pay  compensation. 

Can  the  claim  be  made  that  the  benefit  of  insur- 
ance is  limited  to  the  insured  person  himself,  and 
therefore  the  compulsion  is  entirely  gratuitous  and 
paternalistic?  Is  it  really  "nobody's  business  but 
his  own  "?  In  the  majority  of  cases  the  interest  of 
the  family  is  directly  involved,  since  their  economic 
status  is  entirely  dependent  upon  his  earnings.  And 
in  all  cases  without  exception  the  social  organism 
as  a  whole  has  a  vital  concern,  for  in  absence  of  some 
organized  protection  every  sick  workman  may  be- 
come a  charge  upon  the  community  both  for  his  care 
and  support. 

The  claim  that  this  legislation  is  applicable  only 
to  a  despotic  form  of  government  seems  to  be  readily 
disposed  of  by  the  British  act  of  1911.  And  the 
passionate  criticism  of  this  legislation  because  it  has 
been  "  imported  from  Europe,"  seems  rather  extrava- 
gant in  view  of  the  general  acceptance  of  workman's 
compensation,  which  less  than  10  years  ago  was  de- 
cried with  equal  vehemence  as  thoroughly  contrary 
to  American  traditions. 


Ill 

EXTENT  OF  HEALTH  INSURANCE 

HAVING  determined  upon  a  definite  system  of  health 
insurance,  to  whom  shall  we  make  it  applicable? 

Under  a  compulsory  system,  this  problem  is  some- 
what more  complex  than  if  the  system  is  voluntary. 
If  the  system  is  one  of  platonic  regulation  only,  very 
few  restrictions  are  necessary.  When  a  substantial 
public  subsidy  is  granted,  it  must  be  justified  by  the 
economic  status  of  the  beneficiaries,  for  it  does  not 
appear  desirable  to  dissipate  public  funds,  obtained 
from  general  taxation,  in  subsidizing  the  rich  or  even 
well-to-do. 

In  Denmark,  membership  in  the  subsidized  societies, 
with  full  rights  as  to  subsidy,  is  permitted  to  "  wage- 
workers,  artisans,  home  workers,  and  employees  and 
other  persons  in  similar  economic  conditions,"  while 
individual  cases  may  be  decided  on  their  merits. 

On  the  other  hand,  the  comprehensive  Swiss  act  of 
1911,  which  establishes  subsidized  voluntary  health 
insurance,  contains  no  limitations  as  to  membership, 
the  assumption  probably  being  that  the  subsidy  is 
too  small  to  tempt  many  individuals  of  the  higher 
social  groups  who  are  not  in  need  of  such  insurance. 

As  a  purely  abstract  proposition,  every  form  of 


30      STANDARDS  OF  HEALTH  INSURANCE 

social  insurance  should  be  extended  to  all  the  classes 
which  are  in  need  of  it,  which  would  roughly  fit  in 
with  the  Danish  formula  "  wage-workers  and  other 
persons  in  similar  economic  conditions." 

But  under  all  compulsory  systems  numerous  limita- 
tions are  often  found  and  some  of  these  limitations 
may,  for  reasons  of  practical  administration,  be  quite 
inevitable,  for  compulsion  requires  a  certain  adminis- 
trative machinery,  which  like  all  other  machinery, 
can  work  successfully  only  under  certain  favorable 
conditions.  It  is  generally  admitted  that  insurance 
compulsion  cannot  successfully  be  exercised  directly 
over  the  independently  employed  individual  unless 
possibly  a  comprehensive  passport  system  is  intro- 
duced: that,  on  the  other  hand,  compulsion  and  the 
necessary  financial  operations  can  be  readily  applied 
to  the  employer  and,  through  him,  to  the  wage- 
worker  himself.  For  these  reasons  compulsory  so- 
cial insurance  seldom  if  ever  endeavors  to  extend 
beyond  the  employed  class,  wage-workers  and  salaried 
employees. 

This  limitation  may,  therefore,  be  described  as  an 
inevitable  one,  arising  out  of  the  very  system  of  com- 
pulsory insurance.  Other  limitations,  however,  are 
less  obvious,  and  must  be  explained  by  different  social 
motjves. 

The  original  German  act  of  1883  was  somewhat 
limited,  applying  to  persons  employed  in  mines,  salt 
works,  metallurgical  establishments,  quarries,  pits, 
factories,  railroads,  and  river  steamships,  on  wharves 


EXTENT  OF  HEALTH  INSURANCE        31 

and  in  building  operations,  in  mechanical  trades  and 
all  other  manufacturing  establishments.  It  was 
gradually  extended  by  numerous  amendments  to  new 
industrial  groups. 

The  act  of  1892  included  persons  employed  in 
commercial  establishments,  certain  groups  of  clerical 
employees,  those  in  the  post-office  and  telegraph  serv- 
ice, etc. 

Roughly,  the  act  of  1903,  in  force  until  the  recent 
revision  of  the  whole  insurance  code  in  1911,  in- 
cluded practically  all  industry,  building,  mines,  quar- 
ries, transportation,  commerce,  and  certain  office 
employees.  The  act  of  1911  broadened  the  applica- 
tion of  the  law  so  that  practically  all  employees  are 
included.  The  large  groups  brought  under  the  law 
for  the  first  time  are  the  agricultural  laborers,  do- 
mestic servants,  and  home  workers,  about  5,000,000 
in  all. 

In  Austria  the  sickness-insurance  act  covers  prac- 
tically all  manufacturing,  building  and  construction, 
land  and  water  transportation,  and  practically  all 
commercial  establishments,  but  not  domestic  service 
or  agriculture  or  domestic  industries.  Similarly  the 
Hungarian  system,  according  to  the  amended  act  of 
1907,  includes  almost  all  important  wage  groups  with 
the  exception  of  domestic  service  and  agriculture. 

It  is  significant  that  the  more  recent  laws  are  more 
comprehensive  from  the  very  beginning.  The  Nor- 
wegian act  of  1909  includes  all  industries  and  groups 
of  wage-workers  and  salaried  employees  of  certain 


32      STANDARDS  OF  HEALTH  INSURANCE 

wage  levels,  not  excepting  either  domestic  service  or 
agricultural  wage  labor. 

The  British  act,  adopted  many  years  later,  from 
the  first  endeavored  to  be  practically  universal  in  its 
application.  It  covers  all  employed  persons,  with  a 
few  exceptions  of  minor  importance,  explained  by 
special  considerations,  such  as  previous  existence  of 
similar  provisions. 

The  lesson  of  European  experience,  therefore,  is 
decidedly  for  a  broad  general  act,  rather  than  one 
limited  in  its  application.  It  will  probably  be  argued 
that  it  would  be  better  to  begin  on  a  small  scale,  as 
Germany  has  done.  But  it  must  not  be  forgotten 
that  we  are  entering  the  field  thirty  years  later,  and  in 
face  of  a  wealth  of  experience,  while  Germany  was 
forced  to  undertake  experimental  work  in  an  untried 
direction.  Of  course  specific  exceptions  may  be 
necessary,  often  depending  upon  local  conditions. 
But  the  basic  rule,  or  at  least  the  ideal,  should  be 
general  application. 

The  large  groups,  concerning  which  a  definite  de- 
cision must  be  arrived  at  in  the  very  beginning,  are 
four  or  five:  (1)  agricultural  laborers,  (2)  domestic 
servants,  (3)  home  workers,  (4)  casual  and  irregular 
employees,  (5)  government  employees.  Undoubtedly 
in  the  case  of  each  one  of  these  groups  special  condi- 
tions exist  which  may  require  special  consideration  in 
the  act,  or  in  the  detailed  regulations  which  must  be 
left  to  some  administrative  body.  Detailed  discussion 
of  all  these  specific  conditions  is  impossible  in  a 


EXTENT  OF  HEALTH  INSURANCE        33 

brief  outline  of  standards,  such  as  is  here  intended, 
but  the  main  points  involved  may  be  indicated  here. 
The  history  of  compensation  legislation  in  this 
country  has  already  demonstrated  that  there  is  a 
well-proved  tendency  to  except  many  of  these  groups. 
The  argument  is  often  lack  of  necessity  for  inclusion 
upon  the  plea  either  that  the  occupations  are  non- 
hazardous,  or  that  the  wage  contract  usually  pre- 
supposes reasonable  care  during  disability.  That  is 
frequently  stated  to  be  the  case  with  the  agricultural 
laborers  and  domestic  servants.  In  many  cases  there 
may  be  a  basis  for  this  contention ;  but  it  cannot  be 
universally  true.  Neither  farmers  nor  housewives  will 
support  for  an  indefinite  time  disabled  employees  or 
widows  and  orphans  of  those  fatally  injured,  and  the 
peculiar  conditions  of  the  implied  wage  contract  (in 
so  far  as  they  are  not  exaggerated)  may  at  best 
demand  only  a  modification  and  not  an  abolition  of 
the  compensation  principles.  Nor  are  the  broad 
statements  as  to  the  lack  of  hazard  at  all  based  upon 
actual  facts.  The  truth  of  the  matter  is  that  the  ex- 
clusion of  farmhands  or  domestic  servants  is  due  to  the 

^ 

entirely  different  reason  of  expediency — to  inability 
or  unwillingness  to  force  the  additional  charge  upon 
farmers  or  householders. 

The  reasons  for  excepting  these  two  groups  from 
the  benefits  of  a  health-insurance  scheme  are  even 
weaker  than  in  case  of  compensation,  for  the  argu- 
ments in  favor  of  the  system  are  not  at  all  based  upon 
any  specific  occupational  hazard.  Qnly_  on  a  ground 


34      STANDARDS  OF  HEALTH  INSURANCE 

of  political  expediency — the  numerical  and  political 
strength  of  the  farmers,  the  objection  of  the  house- 
wife to  stamp-licking — can  their  exception  be  justi- 
fied. Such  compromises  may  temporarily  be  neces- 
sary, but  it  is  better  to  be  aware  of  the  nature  of  such 
exceptions.  The  theoretical  standards  must  include 
both. 

Still  stronger  is  the  argument  in  favor  of  inclu- 
sion of  the  home  workers  and  casual  employees.  Both 
of  these  groups  are  probably  at  the  very  bottom  of 
the  economic  ladder.  The  economic  and  hygienic  ef- 
fects of  illness  among  them  are  extremely  serious. 
The  cost  of  the  insurance  to  the  employer  cannot  be 
considered  an  excessive  charge.  But  the  exclusion 
of  these  two  groups  is  often  justified  on  entirely  dif- 
ferent grounds,  namely  by  administrative  considera- 
tions. When  the  conditions  of  the  wage  contract  are 
temporary  or  involved  and  indefinite  it  is  not  always 
a  simple  matter  to  provide  for  the  necessary  adminis- 
trative machinery  to  keep  these  two  groups  insured 
and  enforce  the  employers'  contribution.  But  the  ex- 
perience of  Great  Britain  has  demonstrated  that  it  is 
not  impossible  to  devise  administrative  methods  to 
realize  the  insurance  of  these  groups.  The  details 
are  perhaps  too  complicated  to  go  into  at  any  great 
length  here.  Moreover,  they  do  not  constitute  an 
essential  aspect  of  the  general  standards.  Difference 
in  conditions  may  call  for  different  provisions  in  this 
country.  It  may  seem  better  not  to  embody  such 
administrative  details  in  the  act,  and  the  administra- 


EXTENT  OF  HEALTH  INSURANCE        35 

tive  machinery  created  for  the  system  may  be  trusted 
to  possess  enough  inventive  spirit  to  adopt  European 
methods  or  devise  new  ones.  But  it  is  important  to 
insist  that  the  classes  in  question  should  not  be  ex- 
cluded. 

The  situation  is  somewhat  different  in  regard  to 
government  employees.  The  only  reason  for  exclud- 
ing them  may  be  the  permanency  of  their  employ- 
ment contract  and,  in  addition,  the  provisions  for 
disability  already  existing  and  often  more  liberal 
than  those  that  a  universal  health-insurance  system 
can  offer.  These  conditions,  however,  seldom  apply 
to  the  industrial  employees  of  the  government.  No 
exception  of  government  employees  as  such  appears 
necessary,  though  the  system  established  may  con- 
tain a  general  proviso  for  distinct  treatment  of  all 
groups  already  satisfactorily  provided  for  in  a  dif- 
ferent way. 

Some  opposition  to  the  extension  of  a  compulsory 
system  to  clerical  employees  may  be  expected  because 
of  similar  considerations.  It  is  argued  that  it  is 
quite  customary  for  employers  of  clerical  labor,  espe- 
cially those  employing  large  numbers,  to  continue  the 
full  salary  during  illness,  and  that  systematic  pro- 
vision of  sick  benefits  is  therefore  unnecessary,  or  evei? 
harmful  because  it  would  reduce  the  remuneration 
during  illness  to  two-thirds,  and  in  addition  exact 
contributions  from  the  employees.  This  argument 
was  very  popular  in  Great  Britain  when  the  National 
Insurance  system  was  first  introduced. 


36      STANDARDS  OF  HEALTH  INSURANCE 

But  several  important  considerations  are  disre- 
garded in  this  argument. 

1.  The  practice  is  far  from  being  universal.     De- 
ductions from  salaries  are  not  at  all  uncommon,  even 
in  case  of  large  employers.    And  more  frequently  the 
salary  is  paid  only  in  "  worthy  "  cases,  the  decision 
resting  entirely  with  the  employer. 

2.  The  full  salary  is  seldom  paid  for  any  length 
of  time  (as  for  instance  over  one  month)  in  the  case 
of  the  less  important  employees. 

3.  Even  if  the  salary  is  continued,  no  special  al- 
lowance is  made  for  medical  aid,  nor  is  there  any  care 
taken  to  provide  such  aid  promptly. 

4.  There  is  nothing  in  any  insurance  plan  to  pro- 
hibit the  employer  from  supplementing  the   allow- 
ance from  the  health  insurance  fund  so  as  to  bring 
it  to  a  full  amount  of  wages. 

5.  Health  insurance  only  permits  the  employer  to 
deduct  the  employee's  contribution  from  his  wages, 
but  does  not  require  him  to  do  so. 

It  should  be  evident  that  a  legally  established  con- 
tractual obligation  is  preferable  to  an  allowance 
which  is  made  voluntarily  and  may  be  withdrawn  at 
any  time  at  the  will  of  the  giver. 

Only  a  few  words  need  be  added  in  regard  to 
other  limitations  upon  the  extent  of  application  of 
a  health-insurance  system. 

Several  American  compensation  laws  contain  ex- 
ceptions based  upon  the  number  of  persons  employed 
by  the  individual  employer.  There  is  no  justification 


EXTENT  OF  HEALTH  INSURANCE        37 

for  these  limitations  which  sacrifice  the  interests  of 
the  workman  to  the  misguided  social  ideal  of  protect- 
ing petty  industry — an  ideal  perhaps  more  hopeless 
in  this  country  than  any  other.  And  there  is  still 
less  reason  for  such  exceptions  in  health  insurance. 
As  far  as  industrial  hazard  is  concerned,  it  is  prob- 
ably true  on  the  whole  that  there  is  less  hazard  in 
small  establishments,  which  usually  means  establish- 
ments with  little  utilization  of  mechanical  power. 
But  as  far  as  health  hazards  are  concerned,  the  exact 
opposite  is  true — that  the  smaller  the  establishment 
the  worse  are  the  sanitary  and  hygienic  conditions, 
the  more  danger  is  there  to  the  health  of  the  worker. 

Age  limits  have  been  suggested,  on  the  plea  that 
minors,  who  while  employed  are  not  necessarily  fully 
self-supporting,  might  be  excepted ;  in  Great  Britain, 
persons  who  reach  the  pension  age  are  also  excepted. 
No  good  reasons  for  any  such  exceptions  present 
themselves  in  this  country — the  fact  of  employment 
is  of  decisive  influence.  All  restrictions  would  have 
the  additional  drawback  of  causing  false  statements, 
whether  the  influence  might  be  toward  or  away  from 
insurance. 

More  important  is  the  restriction  as  to  the  size  of 
the  annual  income  which  is  found  in  most  compul- 
sory acts.  In  the  case  of  the  wage-workers  employed 
in  manual  labor,  such  restrictions  seem  hardly  neces- 
sary. The  margins  within  which  wages  fluctuate  are 
after  all  limited.  They  seldom  rise  to  a  level  where 
health  insurance  would  be  altogether  unnecessary, 


38      STANDARDS  OF  HEALTH  INSURANCE 

and  still  more  rarely  do  they  remain  on  such  a  high 
level  for  a  long  time.  Unemployment  frequently  re- 
duces even  the  unusually  high  weekly  wage  to  the  basis 
of  modest  annual  earnings ;  on  the  whole  the  weekly 
wage  of  the  manual  worker  does  not  of  itself  offer 
any  accurate  basis  of  judgment  as  to  the  economic 
status,  unless  accompanied  by  reliable  data  as  to  the 
customary  extent  of  unemployment;  and  the  exact 
determination  of  the  actual  annual  earnings  is  too 
complicated  a  statistical  problem  to  serve  as  a  basis 
for  determining  the  insurance  status  of  each  worker. 

But  the  situation  is  somewhat  different  in  regard 
to  salaried  employees,  who  are  included  in  a  health- 
insurance  system.  The  meaning  of  the  term  is  not  a 
rigid  one.  While  a  majority  are  wage-workers  in 
everything  except  the  technical  nature  of  their  work 
and  the  lesser  frequency  of  payment  periods,  the 
class  includes  a  small  proportion  of  persons  of  very 
high  incomes,  to  whom  neither  compulsion  nor  sub- 
sidy from  employer  or  state  would  appear  necessary. 

Unemployment  among  salaried  employees  is  com- 
paratively slight.  The  size  of  the  monthly  salary 
check  offers  a  reasonably  accurate  standard  for  de- 
termining the  annual  earnings.  Some  maximum 
limitation,  therefore,  appears  useful.  In  Germany 
this  has  been  placed  at  2,500  marks,  in  Great  Britain 
at  £160.  In  this  country,  a  limitation  of  about 
$1,200  or  $1,500  a  year  would  probably  reach  the 
same  economic  level. 

Of  course  such  a  restriction  establishes  only  the 


EXTENT  OF  HEALTH  INSURANCE        39 

limits  within  which  organized  and  subsidized  health 
insurance  is  an  absolute  social  necessity.  Even  be- 
yond it  may  prove  to  be  very  useful.  In  Europe,  at 
last,  a  strong  "  Mittelstandbewegung  "  (middle-class 
movement)  has  developed  which  endeavors  to  gain 
for  the  lower  strata  of  the  middle  class  some  of  the 
advantages  which  social  insurance  has  conferred  upon 
the  wage-worker.  But  in  this  country  any  effort  to 
extend  this  legislation  into  higher  groups  would  be 
premature  and  objectionable.  For  tactical  reasons, 
if  for  no  other,  some  reasonable  limitations,  on  the 
lines  indicated,  are  necessary.  Opposition  to  social 
health  insurance  from  the  insurance  companies  and 
also  from  the  medical  profession  would  be  stimulated 
by  such  extension  into  the  middle  class. 

VOLUNTARY  INSUEANCE 

It  is  necessary  to  remember  that  whatever  advan- 
tage the  voluntary  insurance  method  possesses  need 
not  be  lost  in  a  compulsory  system.  It  is  very  easy 
to  tack  a  voluntary  system  on  to  the  compulsory  one. 
Both  Germany  and  Great  Britain  have  done  so. 

At  least  four  distinct  social  groups  may  be  men- 
tioned, to  whom  the  advantages  of  voluntary  insur- 
ance may  be  offered. 

First,  there  are  the  persons  who  carry  insurance 
for  some  time  under  the  compulsory  law,  and  who, 
because  of  an  improvement  in  their  economic  status, 
rise  out  of  the  compulsory  class.  It  is  very  desirable 


40      STANDARDS  OF  HEALTH  INSURANCE 

that  they  be  permitted  to  preserve  their  membership, 
because  their  relief  from  compulsion  may  not  be 
permanent,  and  because,  having  become  used  to  this 
institution,  they  may  consider  complete  retirement 
from  it  a  hardship.  The  argument  can  be  justly 
made  by  them  that,  having  paid  premiums  while 
young  and  healthy,  they  are  not  fairly  treated  if 
required  to  abandon  insurance  at  an  advanced  age. 
Under  this  group  may  be  mentioned  female  em- 
ployees, who  cease  being  wage-workers  through  mar- 
riage. A  system  which  would  not  permit  them  to 
remain  insured  would  appear  discriminating  against 
the  majority  of  female  employees. 

Secondly,  there  is  a  group  consisting  of  members 
of  a  family  working  within  their  family,  without  any 
definite  remuneration.  As  an  illustration,  the  great 
class  of  farmhands  working  upon  the  family's  farm 
may  be  mentioned.  When  they  constitute  an  integral 
part  of  the  family  economy,  no  wages  are  paid,  and 
in  sickness  they  presumably  will  not  be  deprived  of 
means  of  support.  Yet  the  economic  loss  caused  by 
sickness  is  not  diminished  merely,  but  transferred 
from  the  individual  to  the  family  unit.  The  advan- 
tages of  insurance  are  evident,  but  before  a  general 
compulsory  system  for  this  class  may  be  advocated, 
the  privilege  of  voluntary  insurance  may  be  extended 
to  include  it. 

Thirdly,  there  are  all  those  wage-earners,  or  em- 
ployees, who  for  some  reason  are  not  included  under 
the  compulsory  system.  If  the  reason  for  such  ex- 


EXTENT  OF  HEALTH  INSURANCE        41 

ception  is  administrative  rather  than  economic,  it  is 
evidently  fair  to  permit  them  at  least  to  come  under 
the  system  voluntarily. 

Finally,  if  the  whole  theory  upon  which  compul- 
sory health  insurance  is  based  is  at  all  correct,  then 
the  same  economic  arguments  may  be  applicable  even 
beyond  the  groups  of  wage-workers  and  salaried  em- 
ployees, to  those  whose  economic  status  is  but  little 
better.  We  have  in  mind  the  small  independent  pro- 
ducer or  shopkeeper,  who  often  is  forced  to  remain 
independent  because  he  is  unable  to  obtain  remunera- 
tive employment,  either  in  industry  or  in  commerce. 
As  illustrations  of  this  group  may  be  named  cobblers, 
tailors,  bicycle-repairers,  etc.  Even  the  employment 
of  one  or  two  helpers  is  not  always  evidence  that 
these  employers  earn  more,  and  therefore  need  health 
insurance  less,  than  expert  mechanics.  The  admis- 
sion of  such  individuals  into  the  health-insurance  sys- 
tem causes  no  difficulties  for  the  latter,  and  may  be  a 
great  advantage.  Of  course,  in  the  case  of  all  these 
voluntary  groups,  there  is  no  contribution  from  the 
employer,  either  because  of  the  absence  of  one,  or 
because  of  the  evident  difficulty  of  such  contribu- 
tion in  case  of  voluntary  insurance.  But  the  advan- 
tages of  voluntary  insurance  are  found  in  the  eco- 
nomical management  and  careful  state  supervision 
of  the  insurance-carriers,  and  perhaps  also  in  the 
government  subsidy  in  which  those  voluntarily  in- 
sured may  be  permitted  to  share.  The  question  of 
such  subsidy  will  be  discussed  in  a  subsequent  chapter. 


42      STANDARDS  OF  HEALTH  INSURANCE 

In  any  case,  the  existence  of  such  advantages  may 
require  a  limitation  even  to  the  voluntary  insurance, 
and  a  convenient  limitation  may  be  found  in  the 
amount  of  annual  income.  Under  the  present  level 
of  prices,  an  annual  income  of  $1,500  may  present  a 
convenient  dividing  line,  above  which  we  find  families 
able  to  solve  the  problem  without  any  government 
compulsion  or  subsidy.  Yet  no  dogmatic  importance 
need  be  attached  to  this  line  of  division.  It  will  be 
necessary  in  the  beginning,  because  the  need  of  social 
insurance  must  still  be  argued  from  the  economic 
necessities  of  the  wage-workers;  but  in  Europe  at 
present  this  demand  for  the  extension  of  social- 
insurance  methods  to  the  middle  class  is  very  great, 
and  in  many  instances  has  led  to  legislation. 


IV 
THE  SCOPE  OF  HEALTH  INSURANCE 

THE  term  "  health  insurance  "  may  permit  of  several 
interpretations.  The  various  branches  of  social  in- 
surance gradually  merge  into  one  another.  As  it  is 
often  difficult  to  draw  the  exact  line  of  demarcation 
between  disease  and  industrial  injury,  health  insur- 
ance often  merges  into  accident  insurance.  Even  dis- 
ability consequent  upon  old  age  is  not  always  easily 
distinguished  from  sickness,  and  between  these  two 
lies  the  entire  field  of  permanent  invalidity.  As  a 
matter  of  fact,  the  artificial  lines  of  division  between 
the  different  branches  of  social  insurance  established 
in  different  countries  do  not  often  coincide.  When 
the  structure  of  social  insurance  is  complete,  these 
lines  of  demarcation  are  perhaps  of  secondary  im- 
portance. Their  effect  is  felt  primarily  in  the  dif- 
ferent incidence  of  cost,  which  is  far  less  important 
than  the  existence  of  the  provision.  When  social 
insurance  is  only  in  the  making,  however,  these  exact 
circumscriptions  of  the  field  to  be  covered  by  every 
new  plan  proposed  often  determine  the  time  when 
a  certain  group  of  cases  of  destitution  is  to  receive 
the  necessary  relief.  It  is  imperative,  therefore,  that 
the  exact  limitations  of  the  phrase  "  health  insur- 
ance "  be  carefully  defined. 

48 


44      STANDARDS  OF  HEALTH  INSURANCE 

DISEASE    AND    ACCIDENT 

Under  this  caption  two  problems  present  them- 
selves, that  of  industrial  and  that  of  non-industrial 
accidents.  The  great  publicity  given  to  the  question 
of  workmen's  compensation  during  the  last  few  years 
has  thrown  the  question  of  non-industrial  accidents 
into  obscurity. 

Accidents  may  be  defined  as  traumatic  diseases 
(diseases  or  conditions  brought  about  by  external 
violence).  Wage-workers,  like  other  people,  are  sub- 
ject to  all  these  accidents  of  everyday  life  which  are 
so  frequent,  particularly  in  this  country.  Perhaps 
few  writers  on  the  subject  appreciate  the  importance 
of  the  non-industrial  accidents.  Out  of  538,808 
cases  treated  by  the  famous  Leipzig  local  sick  fund 
in  1887-1905,  62,295,  or  11.5  per  cent,  were  cases 
of  non-industrial  accidents,  while  the  number  of  in- 
dustrial accidents  was  only  42,893,  or  8  per  cent. 

American  statistics  are  extremely  scant  and  frag- 
mentary even  in  regard  to  industrial  accidents,  though 
efforts  to  gather  them  systematically  gradually  ex- 
tend throughout  compensation  states.  But  in  regard 
to  the  frequency  of  non-industrial  accidents  scarcely 
any  definite  information  exists.  It  is  known  in  a 
general  way  that  all  kinds  of  accidental  injuries  are 
more  frequent  in  the  United  States  than  perhaps  any- 
where else  throughout  the  civilized  world,  but  to 
endeavor  to  obtain  at  present  a  definite  measure  of 
industrial  and  non-industrial  accidents  would  be  like 


SCOPE  OF  HEALTH  INSURANCE          45 

calculating  the  proportion  between  two  unknown 
quantities.  A  few  suggestive  data  may  be  quoted. 
According  to  Dr.  Louis  I.  Dublin,  statistician  of  the 
Metropolitan  Life  Insurance  Co.,1  the  experience 
among  the  12  or  13  million  policyholders  of  that 
company  (which  is  preferable  to  general  mortality 
statistics  for  our  purposes  because  it  covers  primarily 
the  industrial  class,  with  its  women  and  children) 
shows  that  deaths  from  "  external  causes  "  (largely 
accidents)  constituted  in  1911-1914  7.87  per  cent 
of  all  deaths,  or  94.4  per  100,000. 

Even  though  recent  years,  under  the  influence  of 
various  "  safety  first  "  campaigns,  show  an  improve- 
ment, from  95.6  per  100,000  in  1911  to  85.9  in 
1914,  the  rate  of  accidental  deaths  is  very  much 
higher  than,  for  instance,  in  England.  Thus  for 
"  white  male  lives  "  age  group  25-34,  the  ratio  in  the 
United  States  (Metropolitan  experience)  was  154.8  2 
and  for  England  and  Wales  only  61.9  per  100,000. 
Some  part  of  this  difference  may  be  due  to  indus- 
trial causes,  but  hardly  all  of  it  can  thus  be  explained. 
Such  data  as  are  becoming  available  seem  to  argue 
against  a  very  great  difference  in  the  industrial  haz- 
ards of  the  United  States  and  Europe.  It  is  at  least 
a  plausible  hypothesis  that,  comparatively  speaking, 

1  "  Mortality  from  External  Causes  Among  Industrial  Policy- 
holders  of  the  Metropolitan  Life  Insurance  Co.,  1911-1914." 
Proceedings  of  the  Casualty  Actuarial  and  Statistical  Society 
of  America,  Vol.  II,  No.  5,  1916. 

•Louis  I.  Dublin,  loc.  cit. 


46      STANDARDS  OF  HEALTH  INSURANCE 

American  life  is  more  dangerous  than  American  in- 
dustry. 

Some  corroboration  of  this  hypothesis  may  be 
found  in  the  variations  of  this  ratio  according  to 
age  groups. 

The  number  of  deaths  from  accidental  causes  per 
100,000  for  white  male  persons  in  1911-1914,  ac- 
cording to  the  Metropolitan  Company's  experience 
was  as  follows: 

Age  group  Death  rate  per  100,000 

Under  5  105.4 

5-9  69-3 

10-14  64.4 

15-19  96.3 

20-24  128.6 

25-34  154.8 

34-44  209-5 

45-54  267.6 

55-64  344.2 

65-74  443.1 

74  and  over  605.7 


All  ages  145.1 

The  substantial  death  rates  from  these  causes  even 
for  non-industrial  ages  are  especially  noteworthy. 

Fatal  cases,  however,  present  only  a  very  small 
proportion  of  non-industrial  as  well  as  industrial  ac- 
cidents (of  the  latter  less  than  1  per  cent).3 

•See  I.  M.  Rubinow,  Standard  Accident  Table  (1915), 
p.  38. 


SCOPE  OF  HEALTH  INSURANCE 


47 


The  largest  insurance  company  writing  personal 
accident  insurance  reports  the  payment  in  one  year 
of  15,719  claims  of  which  only  5,746  or  36.5  per  cent 
were  due  to  occupational  causes.  It  is  true  that 
among  the  persons  carrying  this  form  of  accident 
insurance  non-industrial  classes  predominate ;  never- 
theless the  distribution  of  claims  according  to  causes 
is  at  least  suggestive.* 


No.  of 
claims 

Autos  and  vehicles   1,303 

Bicycles  and  motorcycles   .  .       240 

Horses  and  vehicles   878 

Other  modes  of  traveling  .  .    1,247 

Accidents  at  home 2,216 

Sports  and  recreation 1,642 

Accidents  to  pedestrians  . . .    1,877 

Elevators    37 

Animal  bites 92 

Miscellaneous  .  441 


Per 

cent 
8.3 

Payments 
$361,437 

1.5 

21,880 

5.6 

107,471 

7.9 

273,041 

14.2 

169,932 

10.4 

152,109 

11.9 

141,915 

.2 

16,693 

.6 

3,176 

2.8 

120,620 

63.4 

1,368,274 

36.6 

344,772 

Total,  non-occupational    .  . .   9,973 
Occupational    5,746 

Total 15,719       100.0      1,713,046 

It  is  evident  that  the  compensation  movement  alone 
cannot  solve  the  entire  problem  of  accidental 
injuries. 

It   is  the   uniform   practice,   therefore,   in  prac- 

4  Travelers  Insurance  Co.  Agentt'  Record,  Vol.  X,  No.  2, 
Jan.  29,  1912. 


48      STANDARDS  OF  HEALTH  INSURANCE 

tically  all  health-insurance  systems,  to  treat  cases  of 
non-industrial  accidents  exactly  in  the  way  in  which 
cases  of  sickness  are  treated.  The  only  notable 
exception  is  the  new  law  of  Switzerland,  which  has 
brought  into  existence  a  special  system  of  insurance 
against  non-industrial  accidents.  Under  this  system 
more  substantial  benefits  are  given  than  otherwise 
would  be  due,  but  the  necessity  of  further  complicat- 
ing the  structure  of  social  insurance  seems  to  be  a 
serious  objection.  Of  course  non-industrial  accidents 
often  result  in  permanent  disability  which  the  health- 
insurance  system  usually  does  not  take  cognizance 
of,  but  it  seems  preferable  to  treat  such  cases  ex- 
actly as  other  cases  of  invalidity  are  treated. 

Somewhat  more  complicated  is  the  question  of  in- 
dustrial accidents.  The  treatment  of  such  cases 
largely  depends  upon  whether  or  not  accident  com- 
pensation exists  at  the  time  of  the  establishment  of 
the  health-insurance  system. 

In  Europe  health-insurance  systems  have  been  es- 
tablished in  a  few  cases  before  accident  compensa- 
tion. It  is  quite  certain,  however,  that  in  this  coun- 
try health  insurance  has  no  chance  at  all  in  any 
state  before  an  accident-compensation  law  has  been 
passed.  Of  course,  if  no  accident-compensation  law 
exists,  the  problem  of  industrial  accidents  does  not 
seem  to  differ  from  that  of  non-industrial  accidents 
except  for  one  feature:  there  is  the  opportunity  in 
many  cases  to  collect  more  or  less  substantial  dam- 
ages from  the  employer.  Even  in  case  of  non-indus- 


SCOPE  OF  HEALTH  INSURANCE          49 

trial  accidents,  a  similar  opportunity  often  presents 
itself  as  against  the  responsible  person,  since 
the  law  of  "  public  "  liability  is  in  practice  very 
much  more  stringent  than  that  of  employers' 
liability. 

It  is  not  the  intention  of  the  health-insurance  law 
to  create  a  condition  of  over-insurance,  where  the 
benefits  may  be  larger  than  the  loss,  but,  on  the  other 
hand,  verdicts  in  liability  suits  are  not  collected  with- 
out great  loss  of  time,  and  immediate  aid  may  be 
necessary.  The  situation  may  require  special  admin- 
istrative provisions,  not  only  in  the  case  of  non- 
industrial  accidents,  or  industrial  accidents  where  no 
compensation  laws  exist,  but  even  in  the  presence  of  a 
compensation  law,  the  application  of  which  in  most 
cases  is  subject  to  many  narrow  limitations.  In 
other  words,  if  in  New  York,  for  instance,  an  em- 
ployee is  injured,  but  for  some  reason  finds  himself 
outside  of  the  protection  of  the  compensation  act, 
the  health-insurance  system  should  be  made  appli- 
cable. Where,  however,  the  compensation  law  does 
apply,  it  is  not  and  should  not  be  the  intention  that 
double  indemnity  be  paid.  The  simplest  way  to 
avoid  the  payment  of  such  double  indemnity  would  be 
through  an  automatic  rule,  by  which  a  case  comes 
under  the  provision  of  either  one  or  the  other  of  the 
two  insurance  organizations.  In  practice,  however, 
the  line  of  division  is  not  so  well  defined.  In  all  the 
three  countries  whose  systems  are  analyzed  for  the 
purpose  of  deriving  a  set  of  standards,  the  sickness- 


50      STANDARDS  OF  HEALTH  INSURANCE 

insurance  carriers  are  required  to  carry  part  of  the 
cost  of  accident  compensation. 

Germany  has  found  it  expedient  to  place  the 
handling  and  compensation  of  all  industrial  accidents 
for  the  first  13  weeks  of  disability  upon  its  health- 
insurance  funds.  Accordingly,  industrial  accidents 
for  the  first  13  weeks  are,  with  a  few  minor  excep- 
tions, treated  like  all  other  cases  of  sickness.  Similar 
treatment  is  given  to  industrial  accidents  in  most 
other  countries  with  compulsory  sickness  insurance, 
though  the  period  of  disability,  the  cost  of 
which  is  imposed  upon  sickness-insurance  funds, 
varies. 

In  Russia  the  same  period  of  13  weeks  has  been 
established  by  the  new  insurance  act  of  1912,  much 
against  the  protest  of  the  labor  party  in  the  Duma. 
In  Hungary  the  limit  is  placed  at  10  weeks,  and  in 
Austria  it  is  placed  at  4  weeks.  The  shortest  period, 
of  2  weeks  only,  is  found  in  Roumania. 

The  argument  which  may  be  made  in  favor  of  such 
arrangements  is  that  the  health-insurance  carrier  has 
the  necessary  machinery  for  the  handling  of  such 
cases.  Since  the  vast  majority  of  all  cases  of  in- 
dustrial accident  result  in  complete  recovery  before 
the  expiration  of  13  weeks  (probably  94  per  cent), 
the  compensation-insurance  machinery  is  relieved  of 
the  largest  share  of  the  work.  A  complete  organiza- 
tion of  a  duplicate  set  of  officers  for  handling  the 
medical  care  and  distribution  of  weekly  benefits  un- 
doubtedly contains  a  serious  element  of  waste. 


SCOPE  OF  HEALTH  INSURANCE  51 

Where  accident  compensation  has  come  subse- 
quently to  health  insurance,  the  uselessness  of  such 
duplication  has  been  apparent.  But,  on  the  other 
hand,  the  grave  objection  may  be  raised  that  such  an 
arrangement,  in  a  thinly  disguised  form,  forces  back 
upon  the  wage-workers  part  of  the  cost  of  the  acci- 
dent compensation  which  is  admitted  by  the  very 
theory  of  compensation  to  be  a  proper  charge  upon 
industry.  In  Germany,  the  defense  against  this 
charge  is  found  in  the  employers'  contribution  to  the 
cost  of  health  insurance.  Even  this  defense,  how- 
ever, is  absent  in  the  case  of  Denmark,  where  the 
accident-compensation  act  does  not  come  into  play 
until  after  13  weeks  of  disability,  and  all  these  cases 
are  handled  by  the  sick  benefit  funds,  though  the 
employer  does  not  contribute  anything  to  their  sup- 
port, and  though  insurance  in  these  funds  is  volun- 
tary and  therefore  not  universal. 

Great  Britain  has  not  followed  this  rather  objec- 
tionable method,  perhaps  for  the  reason  that  in  that 
country  compensation  had  existed  for  fifteen  years  be- 
fore the  health-insurance  law  went  into  effect.  The 
British  law  has,  however,  a  waiting  period  of  one 
week,  unless  the  injury  has  lasted  over  two  weeks.  In 
such  cases,  the  health-insurance  system  takes  care  of 
the  injured.  Moreover,  the  accident-insurance  bene- 
fits being  stated  in  percentage  of  wages,  and  the  sick- 
ness benefits  being  specific  (of  which  more  later), 
cases  may  arise  when  the  sickness  benefits  are  higher 
than  the  accident  benefits,  in  which  cases  the  differ- 


52      STANDARDS  OF  HEALTH  INSURANCE 

ence  is  paid  to  the  injured  from  the  health-insurance 
fund. 

Altogether,  it  is  evident  that  the  entire  charge 
placed  upon  the  health-insurance  system  through  in- 
dustrial accidents  in  Great  Britain  is  not  very  great, 
and,  in  view  of  the  substantial  contributions  by  the 
employer  to  the  health-insurance  fund,  it  may  be 
disregarded. 

In  the  United  States,  the  corresponding  provisions 
of  the  compensation  acts  place  us  in  this  respect  be- 
tween Germany  and  Great  Britain.  In  most  of  the 
American  acts,  a  waiting  period  of  two  weeks  has  been 
established,  and  only  in  a  few  states  is  it  limited  to 
one  week.  The  two  weeks'  waiting  period  represents 
a  very  serious  problem;  it  has  called  forth  severe 
criticism  alike  from  labor  organizations  and  from 
many  social-insurance  experts.  It  leaves  a  very  large 
number  of  accidents  without  any  compensation.  Ef- 
forts toward  its  abolition,  or  reduction  to  not  over 
one  week,  are  being  made.  Unless  these  efforts  are 
successful  before  health  insurance  has  been  intro- 
duced there  is  serious  danger  of  a  part  of  the  cost 
of  compensation  being  shifted  over  to  the  health- 
insurance  funds.  In  itself  this  cost  may  not  be  so 
very  high,  but,  by  increasing  the  apparent  cost  of 
health  insurance,  it  may  injure  the  cause  of  the 
latter. 

And  yet  there  is  undoubtedly  a  material  adminis- 
trative advantage  in  the  very  large  number  of  minor 
injuries  being  handled  by  the  health-insurance  organi- 


SCOPE  OF  HEALTH  INSURANCE          53 

zation,  whatever  the  type  of  the  latter  may  be.  Be- 
ing democratically  managed,  it  offers  less  incentive  to 
malingering  and  exaggeration,  and  since  it  requires 
a  comprehensive  organization  of  medical  help  it  may 
be  able  to  furnish  this  at  a  lower  cost  than  does  the 
present  organization  of  accident  compensation. 

Co-operation  between  the  two  systems  is  some- 
thing very  different  from  shifting  a  part  of  the  cost 
from  the  employer  to  the  employee.  A  workable 
agreement  between  the  two  systems,  embodied  in  legis- 
lation, by  means  of  which  most  of  the  minor  cases 
would  be  handled  by  the  health-insurance  carriers, 
while  the  cost  of  such  cases  would  be  reimbursed  from 
the  accident-compensation  fund,  would  furnish  a  con- 
structive contribution  to  the  practice  of  social  insur- 
ance. 

The  health-insurance  bill  of  the  American  Associa- 
tion for  Labor  Legislation  introduced  in  the  legisla- 
tures of  Massachusetts,  New  Jersey,  and  New  York 
during  the  recent  session  provides  that  "  benefits 
shall  be  paid  for  any  sickness  or  accident  or  death  not 
covered  by  workmen's  compensation."  The  question 
has  been  raised  as  to  whether  this  paragraph  ex- 
cluded cases  of  industrial  accidents,  remaining  un- 
compensated  because  they  do  not  extend  beyond  the 
waiting  period  (2  weeks  in  all  the  3  states),  and 
furthermore  whether  benefits  would  be  payable  for 
any  part  of  the  waiting  period  in  case  of  accidental 
injuries  extending  beyond  the  waiting  period.  The 
formal  decision  would  seem  to  depend  upon  the  in- 


54      STANDARDS  OF  HEALTH  INSURANCE 

terpretation  of  the  exact  language  of  the  law,  which 
may  be  different  for  the  two  groups  of  cases  out- 
lined above.  It  may  be  questioned  whether  an  acci- 
dental injury  which  does  not  extend  beyond  the 
waiting  period  is  covered  by  the  compensation  act, 
though  the  fact  that  even  in  such  cases  the  right  of 
suing  the  employer  is  denied  would  seem  to  point  to 
a  positive  answer.  If  the  waiting  period  under  health 
insurance  is  shorter  than  for  accident  compensation 
(under  the  bill  referred  to  only  3  days)  there  is  no 
good  reason  why  the  injured  workman  should  be  less 
cared  for  than  the  ill  workman. 

Workmen's  compensation  legislation  being  what  it 
is  in  this  country,  there  is  another  important  aspect 
in  which  the  health-insurance  system  will  supplement 
accident  compensation — and  that  is  medical  aid.  It 
seems  to  be  preposterous  even  to  require  an  argument 
that  the  need  of  thorough  and  sufficient  medical  and 
surgical  aid  in  case  of  industrial  injuries  should  be 
fully  satisfied.  Yet  the  amount  of  medical  aid  fur- 
nished under  compensation  is  restricted  in  almost  all 
the  acts,  and  in  most  of  them  to  such  narrow  limits  as 
2  weeks,  with  an  additional  money  limit  as  a  further 
restriction.6 

5  Two  weeks  in  Rhode  Island,  Oklahoma,  Iowa  (money  limit 
$100),  Louisiana  ($100),  Vermont  ($75),  Montana  and  New 
Jersey  ($50),  Maine  ($30),  and  Pennsylvania  ($25,  and  in 
exceptional  cases  $75) ;  only  1  week  in  Texas.  No  provision 
for  medical  aid  in  Arizona,  Alaska,  Kansas,  Nevada,  New 
Hampshire,  Hawaii,  Washington,  Wyoming,  and  the  United 
States  employees'  act  of  1908. 


SCOPE  OF  HEALTH  INSURANCE  55 

In  all  these  states  the  health-insurance  system  if 
established  would  be  called  upon  to  fulfil  a  very  im- 
portant function  in  connection  with,  and  bear  a  sub- 
stantial part  of  the  cost  of,  accident  compensation. 
It  may  well  be,  that  this  function  would  be  more 
efficiently  and  more  economically  fulfilled  by  the 
health-insurance  organization,  because  of  its  medical- 
aid  organization.  The  more  reason,  however,  why 
the  principle  of  reimbursement  from  the  accident- 
compensation  fund  be  insisted  upon. 

HEALTH   INSURANCE   AND    OCCUPATIONAL   DISEASES 

Until  recently  Great  Britain  was  the  only  country 
whose  compensation  act  specifically,  and  not  by  con- 
struction, recognized  occupational  diseases  as  a  basis 
for  workmen's  compensation.  By  judicial  construc- 
tion several  American  states  have  accomplished  the 
same  purpose,  and  at  least  one  state,  California, 
has  amended  its  act  so  as  to  bring  all  occupa- 
tional diseases  under  the  law.  But  the  practice  is 
far  from  uniform.  It  goes  without  saying  that 
where  occupational  diseases  have  been  left  out  of 
the  compensation  acts,  they  would  be  covered  by 
the  health-insurance  law.  But  the  fiscal  principle 
of  the  shifting  of  cost  is  seriously  involved  here. 
Besides,  if  the  health-insurance  benefits  be  limited 
in  their  extent,  as  compared  with  accident  compen- 
sation, there  may  still  remain  a  very  important 
argument  in  favor  of  bringing  these  cases  under  the 
compensation  act.  This  is  especially  true  in  regard 


56      STANDARDS  OF  HEALTH  INSURANCE 

to  cases  of  occupational  diseases  resulting  fatally. 

The  basis  of  compensation,  that  injuries  due 
to  the  occupation  should  be  paid  for  entirely  out 
of  the  cost  of  the  product,  is  evidently  applicable 
as  fully  to  occupational  diseases  as  to  industrial  ac- 
cidents. The  difference  is  only  in  the  manner  of  oc- 
currence— sudden  in  an  accident,  gradual  in  case  of 
disease,  evident  and  violent  in  accident,  hidden  and 
insidious  in  disease.  In  fact,  for  the  purpose  of  oc- 
cupational diseases  California  simply  changed  the 
word  "  accident  "  to  "  injury  "  in  the  compensation 
law;  and  the  decisions  in  favor  of  covering  oc- 
cupational diseases  in  other  states  are  usually 
based  upon  a  broad  interpretation  of  the  word 
"  injury  "  to  cover  diseases  as  well  as  accidents. 

There  are  two  arguments  which  are  mentioned  in 
support  of  the  contention  that  occupational 
diseases  should  be  paid  out  of  the  health  insurance 
rather  than  out  of  the  compensation  fund. 

1)  It  is  argued  that  the  very  slow  process  of 
most  occupational  diseases  makes  the  placing  of 
the  responsibility  upon  the  individual  employer 
(usually  the  last  employer)  very  unfair.  The  diffi- 
culty of  determining  where  and  when  the  disease 
was  originally  acquired  is  a  real  one.  But  its  im- 
portance is  exaggerated.  A  sensible  system  of 
compensation  presupposes  insurance  which  equal- 
izes the  cost  among  all  employers  of  each  industry, 
and  the  individual  employer  is  not  responsible  be- 
yond his  stated  premium. 


SCOPE  OF  HEALTH  INSURANCE          57 

2)  It  is  further  argued  that  it  is  still  more  diffi- 
cult to  determine  in  many  cases  whether  the  disease 
is  occupational  or  not,  i.e.  whether  the  particular 
case  was  due  to  the  occupation,  whether  it  was  in- 
curred in  the  place  of  employment  at  all.  This  dif- 
ficulty, which  may  be  a  very  real  one,  evidently 
arises  from  the  lack  of  a  precise  definition  of  the 
term  "  occupational  disease."  Surely  no  such  prob- 
lem could  arise  in  case  of  lead  poisoning  of  a 
painter,  a  caisson  disease  of  a  tunnel  worker.  It 
is  true,  however,  that  under  the  broad  definition  of 
injuries  cases  of  typhoid,  tuberculosis,  etc.,  were 
compensated  in  certain  American  states,  (Massa- 
chusetts, California,  Wisconsin)  where  there  seemed 
to  be  evidence  that  these  had  arisen  in  connection 
with  the  employment. 

The  final  division  of  responsibility  must  neces- 
sarily rest  with  the  compensation  legislation,  since 
the  health  insurance  scheme  must  handle  all  the 
left-over  cases.  But  a  rational  line  of  division 
would  be  to  place  the  responsibility  for  the  specific 
occupational  diseases  upon  the  compensation  sys- 
tem; while  in  the  case  of  general  diseases  it  would 
prevent  a  good  deal  of  acrimonious  controversy, 
if  the  health  insurance  scheme  accepted  entire 
responsibility  for  them.  In  so  far  as  some  indus- 
tries may  be  responsible  for  an  unusual  amount  of 
this  general  sickness,  it  is  a  problem  for  rate  ad- 
justment according  to  hazard  to  be  discussed  more 
fully  in  a  subsequent  chapter. 


58      STANDARDS  OF  HEALTH  INSURANCE 

HEALTH    AND    INVALIDITY    INSURANCE 

The  relation  between  these  two  branches  of  social 
insurance  is  even  more  important  than  the  last  two 
or  three  problems  discussed.  A  definite  decision  con- 
cerning this  is  necessary  at  the  very  outset,  because 
a  good  many  problems  of  organization  and  finance 
are  dependent  upon  it.  It  will  be  necessary,  there- 
fore, to  go  into  some  detail  concerning  this  question. 

Theoretically,  it  is  not  easy  to  draw  the  dividing 
line  between  sickness  and  invalidity.  The  substitu- 
tion of  the  English  term  "  health  insurance  "  for  the 
German  term  "  sickness  insurance  "  makes  any  line  of 
distinction  still  more  difficult.  One  merges  into  the 
other.  Under  sickness  so-called  acute  attacks  are 
usually  understood.  Invalidity  is  permanent  (or  at 
least  chronic,  prolonged  )  illness  and  disability,  or  dis- 
ability due  to  previous  illness.  Qualitatively,  also, 
sickness  is  understood  to  carry  with  it  total  disability 
for  the  time  being  (or  else  the  sick  benefits  are  not 
granted),  while  the  definition  of  invalidity  may  be 
more  lenient,  and  may  be  interpreted  to  mean  a  sub- 
stantial reduction  of  earning  capacity,  due  to  failing 
health  and  strength.  Thus,  invalidity  gradually 
shades  into  old  age  at  the  other  end. 

It  is  quite  clear  that  as  an  economic  problem  in- 
validity, when  given  this  broader  interpretation,  is  of 
equal  importance  with  that  of  sickness,  and,  as  far  as 
the  individual  cases  are  concerned,  of  even  greater  im- 
portance. There  can  be  no  question  as  to  the  desir- 


SCOPE  OF  HEALTH  INSURANCE          59 

ability  of  the  insurance  method  of  provision  against 
it.  The  real  problem  is  whether  invalidity  for  insur- 
ance purposes  should  be  merged  with  sickness,  on 
which  it  borders  on  one  side,  or  with  old  age,  on 
which  it  borders  on  the  other;  or  whether,  finally,  it 
should  be  made  a  matter  for  distinct  treatment. 

The  predominating  method  under  compulsory 
health-insurance  systems  is  to  deal  with  temporary 
total  disability,  and  leave  invalidity  to  the  old-age 
insurance  systems.  That  is  essentially  the  German 
plan,  followed  by  most  continental  systems.  Under 
this  system  temporary  invalidity  may  be  treated  by 
the  health-insurance  institutions,  primarily  as  far 
as  periods  of  recuperation  from  acute  illness  are  con- 
cerned ;  but  outside  of  that  a  definite  time  limit  exists 
beyond  which  the  disabled  cannot  be  cared  for  by  the 
health-insurance  carrier. 

In  Germany,  the  dividing  line  between  sickness  and 
invalidity  is  the  maximum  limit  of  26  weeks  (raised 
in  1903  from  the  original  13  weeks'  limit)  which  in- 
dividual sickness-insurance  funds  may  increase  to  a 
year.  The  invalidity  and  old-age  insurance  system 
handles  both  the  cases  of  permanent  invalidity  and 
also  the  cases  of  sickness  extending  beyond  the  nor- 
mal sickness  period.  The  distinctive  feature  of  the 
German  system  is  that  invalidity  is  defined  as  inability 
to  earn  more  than  one-third  of  the  normal  amount, 
and  therefore  embraces  what  in  the  jargon  of  com- 
pensation is  known  as  permanent  partial  disability, 
as  well  as  cases  of  total  permanent  disability. 


60      STANDARDS  OF  HEALTH  INSURANCE 

In  Denmark,  the  system  being  voluntary,  indi- 
vidual associations  are  permitted  to  determine  the 
details  for  themselves;  but  according  to  the  law 
money  benefits  can  be  granted  only  in  case  of 
actual  sickness  and  complete  disability,  not  partial 
disability  or  invalidity.  As  a  matter  of  fact,  very 
few  insurance  funds  grant  benefits  for  over  13 
weeks. 

In  Great  Britain,  on  the  other  hand,  invalidity  in- 
surance is  joined  with  sickness  into  one  system,  so  far 
as  organization  and  finances  are  concerned,  although 
the  benefits  are  different.  The  invalidity  benefits  are 
termed  "  disablement  benefits  "  and  may  be  given  for 
life,  while  sick  benefits  are  payable  for  26  weeks  only. 
The  definition  of  invalidity  is  strict  and  narrow,  in- 
cluding only  total  disability,  and  is,  therefore,  more 
comparable  to  the  benefits  given  in  Germany  to  cases 
of  sickness  extending  beyond  26  weeks,  than  to  the 
German  invalidity  benefits. 

With  the  two  great  precedents  of  Germany  and 
Great  Britain  entirely  at  variance  with  each  other, 
the  question  as  to  the  comparative  advantages  of  the 
two  systems  is  not  an  easy  one.  Actuarially  the 
treatment  required  by  the  two  systems  is  not  at  all 
similar.  As  will  be  explained  at  greater  length 
presently,  when  the  financial  basis  is  studied,  sickness 
insurance  deals  mainly  with  a  constant  charge.  While 
the  rate  of  sickness  increases  with  age,  the  rate  of  in- 
crease is  not  very  great,  and  the  average  age  of  any 
industrial  group  is  not  very  much  subject  to  change. 


SCOPE  OF  HEALTH  INSURANCE          61 

Since  the  maximum  cost  of  any  one  case  is  limited, 
substantial  reserves  are  scarcely  necessary. 

Financially,  sickness  insurance  is  elastic;  deficits, 
if  any,  develop  rapidly  and  may  be  rapidly  corrected. 
For  this  reason  the  German  system  can  afford  to 
leave  the  financial  problems  to  the  determination  of 
the  separate  sick  funds. 

On  the  other  hand,  invalidity,  at  least  in  its 
broader  interpretation,  is  largely  a  result  of  advanc- 
ing age.  Like  old-age  insurance,  invalidity  insurance 
requires  substantial  reserves,  if  a  rapid  increase  in 
cost  of  such  insurance  is  to  be  prevented.  Invalidity 
insurance  is  therefore  a  matter  for  long-term  con- 
tracts ;  it  is  a  permanent  agreement  which  must  be 
subject  to  strict  control  if  the  solvency  of  the  insur- 
ance-carriers is  to  be  guaranteed.  For  this  reason, 
invalidity  insurance  (like  old-age  insurance)  in  Ger- 
many is  carried  on  by  the  larger  insurance  institutes, 
which  are  practically  state  institutions  and  are  all 
the  time  under  strict  government  control.  To  insure 
a  fair  balance  between  income  and  expenditures  a  very 
careful  actuarial  study  of  invalidity  statistics  must 
precede  the  preparation  of  the  rates. 

When  invalidity  benefits  are  combined  with  sick 
benefits,  as  was  done  in  Great  Britain,  and  one  rate 
of  contribution  is  quoted  for  both,  all  the  actuarial 
difficulties  of  invalidity  insurance  are  extended  over 
the  entire  health-insurance  system.  The  solvency  of 
the  health-insurance  carrier  may  be  only  apparent, 
because  the  funds  which  should  have  been  accumulated 


62      STANDARDS  OF  HEALTH  INSURANCE 

to  meet  the  future  increasing  charge  of  invalidity  may 
have  been  utilized  in  payment  of  sick  benefits.  Never- 
theless, if  the  health-insurance  system  is  based  upon 
compulsion  to  insure  with  a  prescribed  carrier,  the 
financial  difficulty  may  not  be  fatal.  So  long  as  the 
insurance-carrier  is  sure  of  its  hold  on  a  definite 
group  of  insured,  it  can, meet  the  increased  cost  by 
distribution  among  all  of  them.  The  excessive  burden 
may  be  felt,  but  cannot  be  escaped.  But  the  British 
system  unfortunately  was  based  upon  freedom  of 
choice  between  insurance-carrier,  and  right  of  trans- 
fer from  one  carrier  to  another.  Thus  the  financial 
problems  became  doubly  complex.  With  a  system  of 
"  level  premiums,"  with  which  the  public  is  familiar- 
ized through  life  insurance  (i.e.,  premiums  which 
should  be  increasingly  larger,  but  which  are  recom- 
puted to  equal  annual  amounts,  so  that  in  the  early 
years  the  premiums  represent  an  over  payment,  and 
in  later  years  are  below  the  necessary  amount,  and 
the  reserve  accumulated  in  earlier  years  is  gradually 
absorbed  in  the  course  of  years),  the  entrance  of 
an  insured  of  advanced  age  would  represent  a  loss 
to  the  insurance-carrier,  unless  the  reserve  value  at 
his  age  is  paid.  The  British  system,  therefore,  re- 
quired a  very  complex  system  of  bookkeeping  with 
reserve  values  for  each  age,  and  cross-entries  between 
different  funds  for  every  case  of  transfer  from  one 
fund  to  another.  This  again  required  the  centraliza- 
tion of  all  funds  in  government  institutions.  Thus 
many  difficulties  of  accounting  and  actuarial  prac- 


SCOPE  OF  HEALTH  INSURANCE          63 

tice  were  created,  which  were  increased  by  the  very 
uncertainty  of  actuarial  data  upon  which  all  com- 
putations were  made.  A  large  share  of  the  criticism 
of  the  British  system  emanates  from  these  difficulties, 
while  the  German  system  dealing  with  sickness  only 
has  the  advantage  of  simplicity  and  freedom  from 
actuarial  complications. 

These  actuarial  difficulties  would  have  been  even 
greater  if  the  British  definition  of  invalidity  were  as 
broad  as  that  of  the  German  law.  The  British  defini- 
tion approaches  that  of  the  "  total  permanent  dis- 
ability clause  "  under  modern  American  life  insur- 
ance contracts,6  which  but  rarely  comes  into  play. 

It  is  evident  that  true  industrial  invalidity  due  to 
(possibly  premature)  failing  of  earning  power  is  a 

•  Within  the  last  20  years  the  practice  has  rapidly  developed 
to  add  to  the  life  insurance  contract  a  provision  waiving  the 
payment  of  premiums  in  case  of  total  permanent  disability. 
An  additional  charge  is  usually  made  for  this  clause,  which  is, 
however,  so  small  as  to  be  almost  negligible,  not  so  much 
because  total  permanent  disability  is  so  rare,  but  because  the 
mortality  among  those  suffering  from  it  is  very  high.  (See 
"  The  Total  Disability  Provision  in  American  Life  Insurance 
Contracts,"  by  Bruce  D.  Mudgett,  Ph.D.  (1915).  The  Tra- 
velers Insurance  Co.  recently  reported  that  it  paid  claims 
under  such  clause  in  43  cases,  of  which  there  were 

Tuberculosis     in  14  cases 

General  paresis    "12      " 

Other  diseases  of  nervous  system  "11      " 

Cancer    "    2      " 

Injuries     "    3      " 

Other  cases   "    1      " 

43  cases 


64      STANDARDS  OF  HEALTH  INSURANCE 

much  more  comprehensive  concept  and  a  much  more 
frequent  occurrence.  Again,  for  lack  of  statistics, 
definite  quantitative  statements  cannot  be  made.  It 
is  known,  however,  that  the  similar  condition  of  par- 
tial permanent  disability  is  very  much  more  frequent 
than  total  permanent  disability.  According  to  the 
Standard  Accident  Table,  which  represents  the  au- 
thor's effort  to  construct  a  general  table  of  distribu- 
tion of  industrial  accidents  according  to  the  gravity 
of  the  injury,  there  may  be  expected  out  of  every 
100,000  accidents  133  cases  of  permanent  total  dis- 
ability and  4,742  cases  of  permanent  partial  dis- 
ability. According  to  the  German  interpretation  all 
cases  with  the  earning  capacity  reduced  to  one-third 
or  less  constitute  invalidity.  Some  15  per  cent  of 
these  cases  have  suffered  a  disability  of  66  2-3  per 
cent  or  over,  or  have  retained  an  earning  capacity 
of  33  1-3  per  cent  or  less — 711  cases  per  100,000 
or  between  5  and  6  times  as  many  as  there  are  cases 
of  permanent  total  disability.  Under  effect  of  dis- 
ease, rather  than  injury,  coupled  with  the  effect  of 
advancing  old  age,  the  number  of  these  lighter  cases 
may  be  still  more  numerous.  Nor  is  the  mortality 
among  these  cases  as  high  as  among  the  hopeless 
cases  of  total  invalidity. 

Adding  this  feature  to  the  ordinary  limited  health 
benefits  would,  therefore,  tremendously  increase  the 
possible  financial  burdens  and  perhaps  make  alto- 
gether impossible  the  particular  system  of  health  in- 
surance outlined  in  these  pages. 


SCOPE  OF  HEALTH  INSURANCE          65 

An  explanation  of  the  differences  between  the 
German  and  British  methods  may  be  found  in  the 
different  provision  made  by  the  two  countries  for 
old  age.  Germany  with  its  system  of  compulsory 
old-age  insurance  could  very  readily  extend  the  ac- 
tivity of  its  insurance  institute  to  cover  invalidity  as 
well.  The  British  National  Insurance  act  found 
Great  Britain  already  in  possession  of  a  system  of 
non-contributory  old-age  pensions.  Public  opinion 
would  not  have  countenanced  the  addition  of  non- 
contributory  invalidity  pensions  (although  there 
would  have  been  a  precedent  for  it  in  the  French  old- 
age  pension  act  of  1907,  which  includes  invalidity), 
and  a  separate  organization  for  invalidity  probably 
appeared  too  complex.  A  practical  way  out  of  the 
difficulty  appeared  in  the  combination  (rather  un- 
usual in  the  history  of  social  insurance)  between 
sickness  and  invalidity  insurance. 

In  this  country  the  field  is  open  for  either  method ; 
we  have  neither  compulsory  old-age  insurance  nor 
non-contributory  old-age  pensions,  nor  has  either  of 
these  two  methods  as  yet  entered  the  domain  of 
practical  politics.  Both  methods  have  already  re- 
ceived the  support  of  some  theoretical  propaganda; 
as  far  as  popular  support  is  concerned,  the  advan- 
tage seems  to  be  on  the  side  of  non-contributory  pen- 
sions, which  have  achieved  considerable  popularity 
among  organized  labor.  Some  preferences  either  for 
or  against  inclusion  of  invalidity  may  come  as  a 
result  of  partisanship  in  favor  of  either  of  these  two 


66      STANDARDS  OF  HEALTH  INSURANCE 

plans.  Adherents  of  non-contributory  old-age  pen- 
sions may  prefer  to  see  the  problem  of  invalidity 
settled  in  connection  with  health  insurance,  with  the 
hope  of  thus  facilitating  a  system  of  non-contributory 
old-age  pensions. 

It  should  not  be  assumed,  however,  that  these  two 
problems  stand  to  each  other  in  the  relation  indicated. 
The  question  of  comparative  advantages  of  non- 
contributory  pensions  and  compulsory  insurance  for 
the  purpose  of  old-age  relief  may  be  decided  on  its 
own  merits  in  due  time.  The  present  task  of  carry- 
ing through  a  system  of  health  insurance  will  be 
very  much  simplified  if  it  be  kept  separate  from  that 
of  invalidity  insurance. 

Besides,  the  decision  in  favor  of  keeping  these  two 
branches  of  insurance  actuarially  distinct  need  not 
at  all  interfere  with  the  simultaneous  introduction  of 
both  systems,  even  by  the  same  legislative  enact- 
ment, as,  for  instance,  the  entirely  independent  sys- 
tems of  health  and  unemployment  insurance  have 
been  established  by  the  British  National  Insurance 
act  of  1911,  and  as  accident  compensation  and  sick- 
ness insurance  have  been  combined  in  the  same  Swiss 
law.  Nor  would  it  make  some  co-operation  between 
the  administrative  organisms  of  the  two  systems  im- 
possible. The  only  step  that  is  here  urged  is  that 
the  actuarial  foundations  of  the  two  systems  be  kept 
independent  of  each  other,  and  that  the  advantages 
of  freedom  from  actuarial  difficulties  be  preserved 
for  the  health-insurance  system,  as  they  easily  can  be. 


MEDICAL  BENEFITS 

THE  direct  object  of  health  insurance  is  the  com- 
plete or  at  least  partial  restitution  of  the  losses  sus- 
tained through  sickness.  This  demands  two  broad 
divisions  of  service:  (1)  a  money  benefit  during  loss 
of  earning  power;  (2)  restitution  of  cost  of  medical 
and  surgical  aid,  or  the  direct  grant  of  such  aid,  in 
all  its  ramifications,  in  kind. 

The  necessity  of  medical  aid,  as  a  part  of  a  health- 
insurance  system,  would  seem  quite  obvious.  Never- 
theless, it  must  be  remembered  that  in  as  many  as 
nine  American  compensation  acts 1  this  feature  is 
completely  lacking,  and  perhaps  the  most  amazing 
thing  is  that  in  Washington  and  Wyoming  this  most 
essential  omission  took  place  in  connection  with  a 
state  insurance  plan.  In  one  tentative  American 
draft  of  a  health-insurance  bill  which  reached  the 
writer,  no  provision  was  made  for  medical  benefits. 
This  is  also  rather  frequently  true  of  voluntary 
American  sickness-insurance  schemes,  as  operated  by 
trade  unions  or  establishment  funds,  while,  on  the 
other  hand,  in  the  large  cities  of  the  eastern  states, 

1  Alaska,  Arizona,  Hawaii,  Kansas,  Nevada,  New  Hamp- 
shire, Washington,  Wyoming,  United  States  employees'  com- 
pensation act  of  1908. 

67 


68      STANDARDS  OF  HEALTH  INSURANCE 

many  co-operative  organizations  (lodges,  etc.)  are 
found  among  foreign-born  workmen  which  endeavor 
to  grant  cheap  medical  aid  only,  independently  of 
money  sickness  benefits.  It  cannot,  therefore,  be 
stated  too  emphatically  that  only  through  a  combi- 
nation of  both  of  these  forms  of  relief  can  the  social 
purposes  of  health  insurance  be  accomplished. 

It  is  rapidly  becoming  recognized  that  the  most 
important,  though  indirect,  social  purpose  of  insur- 
ance is  its  preventive  effect.  The  recent  sensational 
charges  against  fire  insurance  were  largely  based 
upon  the  assertion  that  the  effects  of  its  methods 
were  contrary  to  prevention,  and  the  defense  pointed 
at  the  preventive  effect  of  schedule  rating.  The 
broad  movement  for  "safety  first "  resulting  from 
compensation  legislation  is  a  matter  of  recent  his- 
tory, and  the  various  compensation-insurance  carriers 
vie  with  one  another  in  extending  measures  of  preven- 
tion in  order  to  establish  for  themselves  the  right  to 
continued  existence.  Even  in  the  old  and  well-estab- 
lished business  of  private  life  insurance,  the  movement 
to  accomplish  not  only  successful  selection,  but  also 
prevention,  is  gaining  strength  and  finds  expression  in 
the  Life  Extension  Institute,  in  the  nursing  service, 
in  periodic  examinations  of  insured,  in  the  recognition 
of  social  responsibility  toward  the  rejected  applicant, 
and  so  forth. 

Perhaps  in  no  branch  of  insurance  is  the  road  to 
prevention  so  clearly  indicated  as  in  health  insurance 
through  the  granting  of  medical  aid.  So  far  as  the 


MEDICAL  BENEFITS  69 

curative  effect  of  treatment  of  individual  cases  is 
concerned  the  same  situation  is  found  in  accident 
compensation.  But  only  in  rare  cases  are  working- 
men  subject  to  repeated  industrial  accidents,  and  the 
effect  of  a  successful  treatment  of  one  injury  in 
preventing  another  is  somewhat  far-fetched.  But  in 
health  insurance  the  connection  between  one  attack  of 
illness  and  another  is  direct  and  obvious.  Every 
case  of  illness  is,  strictly  speaking,  a  predisposing 
cause  for  subsequent  illnesses.  Even  in  case  of  those 
forms  of  sickness  which  are  followed  by  immunity, 
a  general  debilitating  effect  cannot  altogether  be 
avoided.  Naturally  the  prevention  of  the  destructive 
effects  of  illness  depends  to  a  large  extent  upon  treat- 
ment and  care,  and  the  organization  of  a  proper 
system  of  medical  aid  for  the  masses  is  perhaps  one 
of  the  greatest  factors  in  the  modern  movement  for 
life  conservation.  In  fact,  though  in  case  of  sick- 
ness of  the  bread-winner  the  obvious,  immediate  need 
may  be  for  financial  relief,  it  would  be  no  exaggera- 
tion to  say  that,  so  far  as  final  results  are  concerned, 
proper  treatment  and  a  rapid  cure  of  the  patient  are 
matters  of  far  greater  moment. 

It  is  scarcely  necessary  to  state  that  in  Germany, 
Great  Britain,  Denmark,  in  fact  in  almost  all  coun- 
tries which  have  systems  of  health  insurance  worth  the 
name,  medical  aid  is  an  integral  part  of  the  system,2 

*The  total  omission  of  medical  aid  in  Ireland  was  the  only 
distressing  exception,  until  the  passage  of  the  act  of  1913  by 
Netherlands,  granting  money  benefits  only. 


70      STANDARDS  OF  HEALTH  INSURANCE 

except  perhaps  in  Russia,  where  medical  aid  has  for 
50  years  constituted  a  legal  obligation  of  the  manu- 
facturer to  his  employee,  and  this  condition  has  not 
been  disturbed  by  the  sickness-insurance  law  of  1912. 
In  this  country,  because  of  the  appalling  spread  of 
nostra,  cure  fads,  faith-treating,  Christian  Science, 
etc.,  some  considerable  opposition  to  an  effective  sys- 
tem of  medical  aid  in  connection  with  a  public  insur- 
ance system  may  be  expected.  But  whatever  the 
political  necessities  of  various  "  local  situations " 
may  bring,  the  expert  draftsman  of  legislative  pro- 
posals should  not  be  willing  to  assume  any  compromis- 
ing attitude  in  this  all-important  matter. 

EXTENT   OF   MEDICAL  AID 

While  all  national  health-insurance  systems  are 
alike  in  making  some  provision  for  medical  aid,  there 
is  great  variety  in  the  extent  and  methods  of  such 
service.  It  is  well,  therefore,  to  begin  by  enumerat- 
ing the  various  headings  into  which  the  broad  term 
"  medical  aid  "  may  be  divided:  (1)  ordinary  medical 
aid;  (£)  ordinary  surgical  aid;  (3)  obstetrical  aid; 

(4)  major  surgical  aid  and  treatment  by  specialists; 

(5)  dental  care;   (6)  drugs  and  ordinary  surgical 
supplies;  (7)  special  apparatus  and  appliances;  (8) 
hospital    care;    (9)    sanatoria;    (10)    convalescent 
homes  and  institutes. 

The  list  will  emphasize  the  complexity  of  the  prob- 
lem, which  may  not  otherwise  be  obvious  to  the  lay- 


MEDICAL  BENEFITS  71 

man.  The  division  may  appear  unnecessarily  minute. 
The  ten  forms,  or  perhaps  degrees,  may  be  summa- 
rized in  the  following  three  groups:  (A)  medical 
treatment  (1-5);  (B)  supplies  (6,  7);  (C)  insti- 
tutional care  (8-10).  When  thus  stated  the  neces- 
sity for  each  group  becomes  obvious ;  drugs  or  other 
supplies  may  become  necessary  in  all  cases  and,  in 
some,  effective  results  cannot  be  expected  without 
institutional  care.  In  the  three  countries  selected  as 
types,  some  provisions  are  found  in  regard  to  each  of 
the  three  large  groups  of  aids,  but  in  each  country 
the  legislative  situation  is  different. 

The  Danish  system  being  optional,  the  law  can 
establish  only  minimum  requirements  as  a  condition 
of  recognition  and  of  subsidy.  All  three  forms  of 
service  are  recognized  in  the  law,  but  the  extent  to 
which  aid  must  go  cannot  in  the  nature  of  things  be 
(specified.  Nevertheless,  it  is  significant  that  the 
recognized  societies  are  required  to  furnish  hospital 
treatment  when  necessary. 

While  the  system  is  compulsory  in  Germany,  the 
principle  of  local  autonomy  limits  the  law  to  minimum 
requirements  only,  and  further  extensions  of  the  serv- 
ice are  left  to  the  individual  funds.  Even  the  mini- 
mum requirements,  however,  are  fairly  extensive; 
they  include  medical  attendance,  supply  of  medicines, 
eyeglasses,  trusses,  and  other  minor  therapeutic  ap- 
pliances. This  would  seem  to  be  grouped  under  the 
headings  1,  2  (possibly  4  with  limitations),  6,  and  7 
(with  limitations).  In  regard  to  institutional  care, 


72      STANDARDS  OF  HEALTH  INSURANCE 

the  language  of  the  law  is  not  exacting,  permitting 
the  funds  to  substitute  hospital  treatment  for  ordi- 
nary medical  care,  although,  as  a  matter  of  fact,  the 
development  of  institutional  treatment  in  Germany 
has  been  very  extensive. 

Finally,  Great  Britain  is  perhaps  the  only  country 
which  embodied  in  its  health-insurance  law  a  definite 
and  almost  uniform  system  of  medical  aid.  This  is 
consistent  with  the  general  principle  of  national 
uniformity  in  the  British  system.  The  general 
provisions  of  the  act  include  "  adequate  medical  at- 
tendance and  treatment,"  ordinary  drugs  and  sup- 
plies, such  other  appliances  as  may  be  included  by 
administrative  regulations,  and  the  much-discussed 
"  sanatorium  benefits,"  to  be  granted  only  in  cases  of 
tuberculosis  and  such  other  diseases  "  as  the  Local 
Government  Board  may  appoint."  Further  exten- 
sion of  the  medical  benefits  is  permitted  as  optional 
benefits.  As  will  be  explained  elsewhere,  the  situation 
in  Great  Britain  is  perhaps  the  reverse  of  that  in 
Germany,  in  that  the  actual  conditions  are  very  much 
inferior  to  those  laid  down  as  obligatory  in  the  law. 

In  our  effort  to  establish  here  definite  standards 
of  medical  aid,  the  two  aspects  of  the  problem  must 
be  kept  separate:  the  desirable  standard  of  actual 
accomplishment,  and  the  standard  of  legal  require- 
ment. It  is  obvious  that  the  two  do  not  and,  more- 
over, need  not  always  concede.  Poor  administration 
on  one  hand,  or  unworkable  legislative  standards  on 
the  other,  may  make  the  practice  much  less  satis- 


MEDICAL  BENEFITS  73 

factory  than  the  law.  But  it  is  possible  under  the 
system  of  local  autonomy  and  co-operative  initiative, 
such  as  is  outlined  in  this  book,  for  the  actual  results 
to  be  vastly  superior  to  the  minimum  requirements 
of  the  law.  An  agreement  concerning  standards 
becomes  imperative  at  first  in  formulating  the  legal 
requirements.  How  far  shall  they  go  with  regard  to 
medical  aid? 

The  writer's  own  choice  is  based  upon  a  deep  ap- 
preciation of  the  utmost  importance  of  proper  medi- 
cal care,  perhaps  due  to  a  few  years  of  active  prac- 
tise of  the  medical  profession.  Obviously,  however,  it 
is  useless  to  put  requirements  upon  the  statute  books, 
which  society  on  a  certain  cultural  level  is  utterly 
incapable  of  meeting.  If  a  national  health-insurance 
act  were  in  contemplation,  such  an  act  could  embody 
as  a  minimum  requirement  nothing  which  even  a 
frontier  community,  such  as  Montana,  or  a  back- 
woods community  of  the  South  could  not  reasonably 
comply  with.  But  since  health-insurance  legislation, 
like  compensation  legislation,  will  most  likely  proceed 
within  state  lines  for  some  years  at  least,  it  would 
be  decidedly  wrong  to  establish  no  higher  minimum 
requirements  for  New  York  or  Massachusetts  than 
would  appear  adaptable  to  Wyoming  or  Florida. 

Limiting  our  discussion  for  a  moment  to  the  states 
of  a  higher  cultural  level,  we  may  ask,  What  shall  the 
minimum  requirements  be,  as  expressed  in  the  legis- 
lative act?  Up-to-date  homes  for  convalescents  or 
Zander  institutes  may  not  be  expected  in  every  county 


74      STANDARDS  OF  HEALTH  INSURANCE 

and  school  district,  and  the  development  of  such 
methods  of  cure  may  for  the  time  being  be  left  to 
the  voluntary  efforts  of  the  local  health-insurance 
carriers.  But  outside  of  such  extreme  demands,  it 
seems  to  me,  nothing  less  than  thoroughly  "  ade- 
quate "  medical  and  surgical  care  (to  utilize  the 
splendid  word  of  the  British  act),  including  supplies, 
apparatus,  hospital  and  sanatorium  treatment,  is 
justified. 

Of  course  this  is  a  much  broader  program  than 
the  amount  and  degree  provided  in  Great  Britain 
either  by  the  language  of  the  law,  or  in  actual  prac- 
tice, or  even  in  Germany  by  the  general  law  (though 
not  as  actually  applied),  and  yet  this  formula  is  the 
least  that  conforms  with  the  ideal  of  the  life-conser- 
vation movement  of  this  country.  Medical  aid  is 
not  worth  having  unless  it  conforms  to  the  proper 
standards  of  the  medical  science  of  the  time.  If 
medical  care  under  a  socially  organized  system  of 
sickness  insurance  should  degenerate  to  a  rapid, 
careless  prescription  of  drugs  by  hurried  and  over- 
worked physicians,  then  the  entire  preventive  effect 
of  the  system  would  be  completely  nullified.  We 
may  well  discuss  the  extent  of  economic  relief  which 
society  may  grant  to  its  disabled  wards,  but  the  first 
and  absolute  prerequisite  is  that  it  do  all  that  can 
be  done  to  cure  them.  To  insist  that  less  is  sufficient 
for  the  workman,  because  he  is  a  workman,  is  to 
destroy  altogether  the  constructive  character  of  the 
entire  health-insurance  idea,  considered  as  part  and 


MEDICAL  BENEFITS  75 

parcel  of  the  modern  movement  for  scientific  preven- 
tion of  destitution.  Wherever,  therefore,  social  con- 
ditions at  all  permit  it,  all  the  ten  forms  of  medical 
care  enumerated  above  must  be  included  in  the 
minimum  requirements  of  the  law. 

ORDINARY  MEDICAL  AND  SURGICAL  AID 

The  necessity  for  ample  and  efficient  surgical 
aid  in  addition  to  ordinary  medical  care  is,  or  should 
be,  quite  self-evident.  In  the  entire  criticism  of  the 
practice  of  the  British  national  health-insurance  sys- 
tem made  by  the  Fabian  Research  Department 3 
nothing  carries  so  much  weight  as  the  evidence  that 
even  the  performance  of  ordinary  operations  is  not 
always  guaranteed  to  the  insured  workman.  Nor  is 
it  necessary  to  argue  that  competent  obstetrical  aid 
is  an  absolute  necessity.  This  feature,  however,  will 
be  dealt  with  at  greater  length  presently  in  connec- 
tion with  the  entire  problem  of  maternity  insurance. 

In  a  "  backwoods "  or  frontier  community  the 
requirements  of  expert  surgical  aid  for  major  opera- 
tive work  and  of  treatment  by  specialists  may  appear 
extravagant,  and  yet  a  little  reflection  will  readily 
show  that  if  the  system  of  health  insurance  is  at  all 
to  produce  the  desired  results,  these  services  must  be 
included  among  compulsory  requirements.  It  is  pre- 

*  Committee  of  Enquiry,  Sidney  Webb,  Chairman.  See  The 
New  Statesman,  Special  Supplement  on  the  Working  of  the 
Insurance  Act,  March  14,  1914. 


76      STANDARbS  OF  HEALTH  INSURANCE 

posterous  to  guarantee  to  the  ill  workman  the  diag- 
nosis in  case  of  appendicitis,  or  cancer  of  the 
stomach,  but  not  the  operation ;  it  is  preposterous  to 
expect  him  in  case  of  some  special  forms  of  disease, 
such  as  diseases  of  the  nose,  throat,  or  eye,  or  of 
the  nervous  system,  to  be  satisfied  with  care  by  an 
incompetent  "  general  practitioner,"  or  family  physi- 
cian ;  for  this  would  reduce  the  quality  of  care  given 
even  below  that  to  be  obtained  from  free  dispensaries. 
And  it  is  quite  obvious  that  the  less  available  these 
higher  forms  of  medical  service  are  in  certain  com- 
munities the  more  imperative  it  is  that  the  new  sys- 
tem of  health  insurance  establish  them.  For  in  the 
progressive  communities  public  or  private  charity  al- 
ways stands  ready  to  render  aid  in  an  extreme  case 
and  emergency,  but  in  the  next  community  the  poor 
man  frequently  suffers  serious  injury  to  health  or 
pays  with  his  life  for  this  entire  absence  of  specialized 
and  expert  medical  aid.  In  the  majority  of  German 
cities  this  specialized  medical  service  is  being  granted, 
and  in  progressive  American  communities  it  is  equally 
possible.  It  is  only  because  of  an  archaic  and  faulty 
organization  of  medical  practice  that  the  concepts 
of  specialized  expert  medical  service  and  expensive 
service  have  been  merged  into  one  in  public  opinion. 
The  necessity  of  specialization  in  medicine  has  been 
recognized  at  the  same  time  that  facilities  for  such 
successful  specialization  have  grown.  The  practical 
methods  for  securing  the  treatment  of  special  dis- 
eases by  special  experts  only,  and  at  no  exorbitant 


MEDICAL  BENEFITS  77 

cost,  can  be  brought  about  by  proper  organization, 
of  which  more  will  be  said  when  the  problem  of  or- 
ganization of  medical  aid  is  reached. 

But  it  cannot  be  stated  too  emphatically  right 
here,  that  whatever  the  difficulties,  a  system  of  health 
insurance  is  exceedingly  faulty  which  avoids  these 
difficulties  by  simply  omitting  these  important 
branches  of  medical  service,  as  the  British  system  does 
in  actual  application.  The  legal  demand  for  ade- 
quate medical  aid  is  not  met,  if  no  expert  diagnosis 
through  a  consultant,  no  bacteriological,  chemical,  or 
physiological  examinations,  no  X-rays,  no  expert 
specialist  treatment,  and  no  serious  operation  are 
furnished.  In  view  of  the  large  amount  of  evidence 
collected  by  the  Fabian  Committee,  the  charge  seems 
justified,  that  on  the  whole  medical  treatment  is 
being  provided  under  the  act  only  for  the  minor  ail- 
ments of  the  insured  persons.4 

DENTAL  CAEE 

The  general  principles  enunciated  above  are 
equally  applicable  to  the  question  of  dental  care. 
Here  again  some  constructive  steps  will  be  necessary, 
as  the  situation  even  in  Europe  is  far  from  satisfac- 
tory. 

In  Denmark  no  requirement  as  to  dental  care  is 
contained  in  the  act,  and  there  is  no  evidence  that 
the  recognized  societies  furnish  it  to  any  extent.  The 

*  The  New  Statesman,  Special  Supplement,  March  14,  1914, 
p.  6. 


78      STANDARDS  OF  HEALTH  INSURANCE 

British  act  refers  to  dental  aid  as  one  of  the  per- 
missible "  additional  "  benefits.  The  new  German 
act  specifically  refers  to  dentists,  but  the  extent  of 
dental  care  is  not  prescribed.  Presumably,  simple 
measures  like  extraction  are  considered  an  essential 
part  of  medical  aid.  The  tendency  among  larger 
funds  is  to  provide  for  extensive  dental  service,  and  a 
few  funds  even  provide  part  of  the  cost  of  prosthetic 
dental  work  (artificial  teeth,  crowns,  bridges,  etc.). 

The  superior  development  of  the  science  and  prac- 
tice of  dentistry  in  the  United  States  furnishes  a 
basis  for  a  more  liberal  and  more  satisfactory  pro- 
vision of  dental  aid.  Scientific  dentistry  has  long 
been  recognized  in  this  country  as  a  necessity  rather 
than  a  luxury.  In  establishing  the  minimum  cost  of 
a  standard  of  living,  the  Massachusetts  minimum- 
wage  board  included  a  small  amount  for  dentistry.  It 
is  true  that  dental  diseases  are  seldom  sufficiently 
severe  to  interfere  with  earning  capacity  except  for 
very  short  periods  of  time.  But  the  harmful  though 
insidious  results  of  dental  defect  upon  the  general 
state  of  health  have  already  been  recognized.  "  There 
is,"  says  Professor  Osier,  perhaps  one  of  the  world's 
greatest  physicians,  "  not  one  single  thing  more  im- 
portant to  the  public  in  the  whole  range  of  hygiene 
than  the  hygiene  of  the  mouth.  If  I  were  asked  to 
say  whether  more  physical  deterioration  was  pro- 
duced by  alcohol  or  defective  teeth,  I  should  unhesi- 
tatingly say  defective  teeth." 

And   the  recent  discoveries   of  a   very   close   de- 


MEDICAL  BENEFITS  79 

pendence  of  most  rheumatic  affections,  including  the 
very  serious  affections  of  the  inner  lining  of  the  heart 
and  its  valves,  upon  loci  of  infection  in  the  mouth 
and  particularly  in  the  teeth,  have  placed  a  specially 
high  value  upon  scientific  care  of  the  teeth. 

Many  investigations  have  established  the  great 
prevalence  of  dental  diseases  among  all  ages  and 
groups  of  the  masses.  Wage-workers,  themselves,  are 
also  to  some  extent  aware  of  these  effects.  The 
amount  of  money  spent  by  the  poor  for  dental  work 
is  rapidly  increasing,  but  unfortunately  it  is  seldom 
spent  so  as  to  produce  the  necessary  results.  Within 
recent  years  popular  dentistry  has  been  grossly  com- 
mercialized through  the  development  of  so-called 
"  dental  parlors."  In  these  the  pressure  is  always 
for  prosthetic  dentistry  because  that  is  the  most 
expensive  and  therefore  the  most  profitable  to  the 
commercial  dentist.  The  masses  are  never  told  that 
this  is  the  least  useful  and  most  objectionable  form 
of  dental  aid,  nicknamed  "  septic  "  dentistry  by  some 
experts  in  the  line.  The  cheaper  and  much  more  ef- 
fective prophylactic  work  is  disregarded.  Within 
recent  years,  however,  the  hygienic  importance  of 
early  dental  aid  has  been  so  well  recognized  by 
scientific  students  that  organization  of  regular  den- 
tal departments  in  responsible  hospitals  is  rapidly 
becoming  the  rule.  The  inclusion  of  systematic  den- 
tal aid  as  a  required  branch  of  medical  care  is  urged 
here,  therefore,  because  of  its  general  hygienic 
effects,  and  also  because  it  will  prove  economical  in 


80      STANDARDS  OF  HEALTH  INSURANCE 

the  end  by  substituting  early  and  cheap  satisfactory 
relief  for  delayed,  expensive,  and  often  harmful 
"  gold  teeth." 


MEDICAL   AND    SURGICAL   SUPPLIES 

A  difference  of  practice  may  also  be  observed  in 
the  furnishing  of  the  material  aids  to  medical  care — 
drugs,  supplies,  etc.  In  the  voluntary  system  of 
Denmark  the  furnishing  even  of  drugs  is  optional, 
with  very  unsatisfactory  results.  According  to  the 
latest  data,5  more  than  half  the  societies  (57  per 
cent)  entirely  refused  this  service.  Only  18  per 
cent  paid  for  the  entire  cost;  while  the  remaining 
25  per  cent  contributed  only  a  part  of  the  cost.  Thus 
the  results  of  the  voluntary  system  are  seen  to  affect 
the  quality  of  the  service  very  seriously  by  leaving 
an  economic  motive  for  saving  on  necessary  drugs 
and  supplies.  In  both  the  British  and  German  acts, 
the  furnishing  of  drugs  and  ordinary  supplies  is  com- 
pulsory. As  to  the  more  expensive  surgical  and 
medical  appliances,  the  British  act  leaves  the  ques- 
tion of  how  far  they  shall  be  furnished  to  adminis- 
trative regulations  by  the  insurance  commissioners. 
The  German  law,  in  accordance  with  its  general 
methods  of  establishing  minimum  standards  only, 
makes  the  supply  of  "  eyeglasses,  trusses,  and  other 
minor  therapeutic  appliances  "  compulsory  upon  the 

*  Medical    Benefit    in    Germany    and    Denmark,    by    I.  G. 
Gibbon,  p.   153. 


MEDICAL  BENEFITS  81 

sickness  funds.  In  actual  practice  many  German 
funds  go  far  beyond  that,  and  provide  artificial  limbs, 
artificial  eyes,  etc.  In  Great  Britain  the  situation  is 
unfortunately  just  the  reverse.  The  actual  prac- 
tice, as  established  by  administrative  regulations,  is 
very  inferior  to  the  plain  intent  of  the  law,  as  neither 
trusses  and  elastic  stockings,  nor  crutches,  and  not 
even  eyeglasses  or  syringes,  are  furnished,  not  to 
speak  of  such  "  luxuries  "  as  artificial  limbs. 

Perhaps  nothing  so  strongly  brings  out  the  short- 
comings of  the  British  Health-Insurance  System  as 
compared  with  what  the  German  system  has  accom- 
plished, as  this  petty  parsimony  as  to  necessary  sup- 
plies. A  few  interesting  figures  from  the  report  of 
the  Leipzig  Sick-Insurance  Fund  may  here  be  quoted.6 
It  is  true  that  this  is  perhaps  the  largest  and  best- 
managed  sick-insurance  fund  in  Germany  with  a 
membership  exceeding  200,000,  and  handling  90,000 
cases  of  illness  a  year,  but  for  this  very  reason  its 
experience  is  extremely  valuable  as  an  object  lesson 
of  what  an  efficient  system  of  health  insurance  is  and 
ought  to  be.  In  addition  to  ordinary  drugs  this 
insurance  institution  furnished  during  1912  eye- 
glasses at  the  cost  of  31,307  marks  ($7,451),  trusses, 
etc.,  to  the  amount  of  34,716  marks  ($8,262),  even 
artificial  eyes  (424  marks  or  $101).  It  administered 
25,292  special  medicinal  baths  and  massage  treat- 
ments at  the  cost  of  the  large  sum  of  75,327  marks 

8  Oeschdfts-Bericht  der  Allgemeinen  Ortskrankenkasse  f&r 
die  Stadt  Leipzig  fur  das  Jahr  1912. 


82      STANDARDS  OF  HEALTH  INSURANCE 

($17,928)  ;  electric  and  other  specialized  methods  of 
treatment  (in  Zander  institutes),  at  the  cost  of 
48,233  marks  ($11,479),  and  prosthetic  dental  work 
for  26,688  marks  ($6,352).  Whether  the  amount 
was  sufficiently  large,  it  is  impossible  to  tell  offhand ; 
but  the  mental  picture  created  by  these  statistical 
data  is  of  a  thorough  and  careful  treatment  of  the  ail- 
ments and  the  needs  of  the  insured  workmen.  What 
a  pitiful  contrast  is  presented  by  the  situation  in 
England  when  one  reads  the  pathetic  arguments  of 
the  Fabian  Report,  that  the  English  sufferers  from 
hernia  who  are  assured  "  adequate  medical  treat- 
ment "  under  the  law,  continue  to  go  about  without 
trusses,  unless  able  to  buy  one  from  their  own  sav- 
ings ;  that  "  a  workman,  forbidden  to  resume  work 
without  a  truss  and  yet  given  no  truss,  made  himself 
a  poor  substitute  out  of  cardboard  and  rag,  and  went 
to  work  at  whatever  risk  to  his  future  health." 

Take  the  matter  of  spectacles,  for  instance.  The 
experience  of  the  Leipzig  fund  indicates  that  thou- 
sands of  its  members  annually  are  in  need  of  glasses, 
that  undoubtedly  many  of  them  would  probably  go 
without  glasses  or  buy  cheap  and  injurious  ones  if 
not  furnished  by  the  insurance  fund.  Yet  the  fail- 
ure to  provide  proper  accommodation  by  glasses  not 
only  must  interfere  with  the  earning  capacity  of 
the  sufferer,  but  leads,  according  to  the  evidence  of 
modern  medical  research,  to  serious  disturbances  of 
the  nervous  and  even  digestive  systems. 

The  limitations  of  the  British  system  fully  justify 


MEDICAL  BENEFITS  83 

the  severe  criticisms  made  by  the  Fabian  committee. 
"  Medical  care  "  is  nothing  but  a  delusion,  unless  the 
necessary  mechanical  appliances  are  available  to 
carry  into  effect  the  advice  given  by  physicians. 
Some  appliances  may  be  expensive,  but  it  is  just  be- 
cause they  are  expensive,  and  because  they  are  re- 
quired in  rare  cases  only,  that  they  can  be  furnished 
by  the  insurance  method  much  more  easily  than  by 
individual  purchase.  Moreover,  as  measured  by  the 
amount  of  relief  granted,  and  even  by  the  restoration 
of  earning  capacity,  these  appliances,  as  trusses,  elas- 
tic stockings,  eyeglasses,  or  even  artificial  limbs,  are 
the  cheapest  forms  of  surgical  aid.  A  system  of 
public  health  insurance  is  derelict  in  its  duty  if  it 
fails  to  make  all  possible  efforts  for  a  cure,  or  at 
least  alleviation  of  suffering,  which  modern  medical 
science  permits.  A  normal  act  has,  therefore,  the 
choice  of  only  two  methods:  either  to  enumerate  a 
very  detailed,  almost  exhaustive  list  of  permissible 
appliances  to  be  furnished  according  to  proper  medi- 
cal advice,  or  to  use  the  broad  formula  of  the  Wis- 
consin compensation  act,  and  to  establish  in  plain 
terms  the  right  to  all  necessary  aids  to  treatment. 

INSTITUTIONAL  TEEATMENT 

The  conditions  outlined  above  may  well  apply  to 
all  communities.  In  regard  to  the  third  group — 
namely,  institutional  treatment — the  problem  is  some- 
what more  complex. 


84      STANDARDS  OF  HEALTH  INSURANCE 

Hospital  treatment  is  becoming  more  and  more 
important  in  dealing  with  serious  illness,  partly  for 
technical  and  partly  for  social  reasons.  There  are 
diseases  which  in  the  very  nature  of  things  require 
constant  medical  attention.  It  is  true  that  recently 
medical  science  has  recognized  certain  disadvantages 
in  hospital  treatment,  and  has  indicated  conditions 
under  which  home  treatment  may  be  equally  effective 
medically  and  more  desirable  for  psychologic  rea- 
sons. But  this  may  be  realized  only  under  condi- 
tions which  are  quite  Utopian  as  applied  to  most 
workingmen's  homes. 

Ordinary  hospital  treatment  is  recognized  as  a 
necessity  in  almost  all  European  health-insurance 
systems.  The  Danish  law  requires  the  recognized 
societies  to  furnish  it  whenever  necessary,  and  some 
arrangements  to  supply  it  are  made  by  practically 
all  societies.  The  legal  requirement  that  hospital 
charges  to  the  recognized  societies  must  be  only  half 
the  regular  charges  proved  a  large  inducement.  As 
general  hospital  facilities  are  good,  there  is  seldom 
any  necessity  for  special  hospitals  for  the  exclusive 
use  of  the  societies.  While  the  German  act  is  not  very 
exacting  in  its  language,  as  a  matter  of  fact  there 
has  been  a  very  extensive  development  of  hospital 
treatment  in  connection  with  the  German  system. 
Practically  all  important  sickness  funds  furnish  it, 
and  in  many  of  them  from  10  to  15  per  cent  of  the 
total  budget  is  expended  for  this  purpose. 

The  development   of   special   sanatoria  and   con- 


MEDICAL  BENEFITS  85 

valescent  homes  has  been  largely  optional.  Very 
little  has  been  accomplished  in  Denmark;  on  the 
other  hand,  in  Germany,  the  development  of  such 
institutions,  largely  owned  by  the  sickness  funds 
themselves,  has  been  very  rapid.  Thus,  e.g.,  the 
Leipzig  fund  has  three  convalescent  homes  and 
a  special  Zander  institute  for  treatment  of  func- 
tional disorders  by  special  exercises,  Munich  has  two 
sanatoria,  Hamburg  two  convalescent  homes,  etc. 
This  is  entirely  independent  of  the  special  institu- 
tions established  by  the  invalidity  insurance  institutes 
operating  under  the  old-age  and  invalidity  insurance 
laws,  which  furnish  a  good  deal  of  medical  aid  to 
those  insured.  It  is  the  invalidity  institutes  which 
have  provided  some  65  sanatoria  for  special  treat- 
ment of  tuberculosis,  with  very  important  results. 

The  whole  problem  of  institutional  treatment  in 
Great  Britain  is  still  in  a  very  unsatisfactory  condi- 
tion. The  so-called  sanatorium  benefit  is  limited  to 
tuberculosis  and  such  other  diseases  as  the  Local  Gov- 
ernment Board  may  designate,  but  as  yet  no  others 
seem  to  have  been  so  designated.  The  sanatorium  bene- 
fit is  therefore  comparable  to  the  tuberculosis  treat- 
ment of  the  German  invalidity  insurance,  or  would 
be,  if  in  reality  it  were  not  so  much  inferior  to  the 
standards  of  the  law.  The  sanatorium  benefit  may  be 
given  in  form  of  dispensary  or  even  home  treatment, 
and  in  actual  practice  often  resolves  itself  only  into 
supplementary  allowances  to  the  physician  for  medi- 
cation in  cases  of  tuberculosis,  which  should  be  a 


86      STANDARDS  OF  HEALTH  INSURANCE 

constituent  part  of  the  ordinary  medical  aid.  The 
serious  obstacle  to  the  proper  development  of  this 
benefit  is  the  appalling  insufficiency  of  hospital 
facilities  in  Great  Britain ; 7  but  this,  it  was  hoped, 
would  be  gradually  overcome  through  special  appro- 
priations for  construction  of  tuberculosis  sanatoria. 
How  far  this  program  may  be  continued  in  face  of 
the  financial  problems  created  by  the  war  remains 
to  be  seen.  Nevertheless,  even  if  the  reality  is  very 
much  below  the  standards  established  by  the  law, 
it  has  accomplished  some  good  by  attracting  public 
attention  to  the  lack  of  hospital  facilities,  and  creat- 
ing a  constant,  urgent  demand  from  the  insured  for 
correction  of  this  evil. 

It  is  evident  that  in  the  regulation  of  institutional 
treatment,  more  than  in  any  other  branch  of  medical 
care,  a  certain  latitude  may  be  allowed  out  of  con- 
sideration to  "  local  conditions."  Each  state  may 
decide  for  itself  how  far  institutional  treatment  may 
be  made  obligatory  upon  its  health-insurance  sys- 
tem. If  the  state  is  territorially  large,  and  condi- 
tions throughout  are  not  uniform,  the  actual  extent 
of  institutional  treatment  may  be  left  to  the  funds 
themselves,  or  to  administrative  regulation. 

Nevertheless  simple  acceptance  of  prevailing  con- 

T  Modern  sanitary  science  demands  5  beds  for  every  1000 
of  population.  According  to  the  researches  of  the  Fabian 
Committee,  London  and  the  adjacent  counties  have  about  2 
beds  per  1000,  some  fifteen  counties  have  from  1  to  2  beds,  and 
most  counties  have  even  less  than  1  per  1000. 


MEDICAL  BENEFITS  87 

ditions  as  necessarily  final  would  be  out  of  harmony 
with  the  constructive  character  of  this  legislation. 
A  modern  community  cannot  claim  any  cultural 
standing  if  hospital  facilities  for  treatment  of  grave 
illness  are  insufficient.  Unless  the  geographical  diffi- 
culties are  very  serious,  or  population  very  sparse, 
and  means  of  transportation  unsatisfactory,  an  ear- 
nest effort  should  be  made,  in  conjunction  with  health- 
insurance  legislation,  to  build  up  a  sufficiency  of 
hospital  facilities.  The  same  is  true  of  special  sana- 
toria for  consumption,  while  the  further  refinements, 
such  as  special  institutes  and  convalescent  homes, 
may  for  the  present  be  left  to  voluntary  communal 
effort.  It  may  appear  that  the  joining  together 
of  these  two  issues  is  somewhat  irrelevant,  and  that  a 
state  will,  or  will  not,  have  sufficient  hospital  facilities, 
irrespective  of  all  health-insurance  legislation.  But 
the  obvious  reply  is  that  the  insurance  system  creates 
a  fund,  out  of  which  hospital  treatment  for  its  mem- 
bers may  be  paid  (as  explained  presently),  that  this 
fund  will  be  constituted  largely  through  contribu- 
tions from  the  insured  themselves,  and  that  they  have 
an  implied  right  to  be  furnished  with  not  only  purely 
formal  "  medical  advice  "  but  also  effective  medical 
aid.  There  are  no  difficulties,  except  financial  ones, 
to  the  increase  of  hospital  facilities,  and  the  insurance 
system  is  designed  for  the  very  purpose  of  meeting 
such  financial  difficulties. 


88      STANDARDS  OF  HEALTH  INSURANCE 

CONDITIONS  OF  MEDICAL  AID 

Since  insurance  is  a  contractual  obligation,  some 
limitations  are  often  inevitable,  but  comparatively 
little  need  be  said  concerning  the  limitations  of  medi- 
cal benefits.  In  every  insurance  contract  some  time 
limits  are  necessary.  In  private  insurance  the  policy 
period  and  in  collective  insurance  membership  in  the 
insurance  organization  carry  the  natural  limits,  while 
under  the  system  as  here  outlined  8  membership  itself 
depends  upon  employment  in  an  insured  trade.  Of 
course  all  benefits  of  membership  must  extend  beyond 
the  period  of  active  employment  into  the  period  of 
illness  with  payment  of  benefits.  But  such  exten- 
sion is  also  subject  to  a  limit,  so  long  as  the  line 
of  demarcation  between  health  insurance  and  in- 
validity insurance  is  accepted  as  already  explained. 
Just  where  this  line  of  demarcation  should  be  placed 
may  be  discussed  with  better  advantage  in  connection 
with  the  money  benefits. 

There  may  be  a  time  limit  at  the  beginning  of 
illness  as  well,  which  under  the  term  of  "  waiting 
period  "  has  become  a  distinct  feature  of  compensa- 
tion in  the  United  States.  This,  however,  is  obviously 
inapplicable  to  medical  aid,  where  promptness  is  a 
matter  of  greatest  importance.  Universally,  there- 
fore, the  right  to  medical  aid  begins  with  the  begin- 
ning of  illness. 

Under  the  same  term  "  waiting  period  "  an  entirely 
8  See  pages  35-38. 


MEDICAL  BENEFITS  89 

different  time  limit  is  often  meant:  namely,  the  time 
which  must  elapse  after  the  beginning  of  insurance 
before  the  right  to  the  benefits  is  free  from  all  re- 
strictions. Strictly  speaking,  it  is  a  period  of  proba- 
tion, during  which  the  insured  person  is  really  not 
insured  though  he  may  pay  the  necessary  dues. 
Such  a  provision  may  be  necessary  under  a  volun- 
tary system  for  the  purpose  of  eliminating  persons 
who  might  insure  because  they  know  themselves 
to  be  sick.  In  the  Danish  voluntary  system  such  a 
"  waiting  period "  of  six  weeks  is  required.  But 
while  there  may  be  some  important  reason  for  such 
a  period  of  "  suspended  insurance "  so  far  as  the 
payment  of  money  benefits  is  concerned,  it  appears 
altogether  unnecessary  in  application  to  medical  aid. 
The  possible  abuse  of  the  medical-aid  privilege  is  far 
less  important  than  the  danger  of  denying  aid  to  any 
one  in  real  need  of  it. 

A  considerable  amount  of  medical  aid  may  be 
needed,  moreover,  in  cases  not  requiring  any  discon- 
tinuance of  work.  In  such  cases  any  limitations  upon 
the  amount  of  medical  aid  to  be  furnished  would  be 
socially  indefensible,  since  the  hygienic  effect  of  such 
aid  would  counterbalance  any  consideration  of  ex- 
cessive cost. 

EXTENSION    TO    MEMBERS   OF    FAMILY 

Shall  medical  treatment  be  limited  to  the  insured 
workers  or  shall  it  be  extended  to  the  immediate  de- 


90      STANDARDS  OF  HEALTH  INSURANCE 

pendents  of  the  insured?  At  first,  such  an  ex- 
tension may  be  considered  as  altogether  unwarranted. 
Health  insurance  as  here  outlined  deals  with  the  dis- 
abled wage-earner.  The  entire  philosophy  of  social 
insurance  is  based  upon  the  causal  connection  be- 
tween employment  and  disability  on  one  hand  and 
between  disability  and  unemployment  on  the  other. 
The  inclusion  of  insurance  of  others,  even  though 
they  be  members  of  the  family,  will  be  classed  as  a 
gratuitous  application  of  socialist  policy,  and  as 
such  wifl  call  forth  serious  objections.  Already 
this  tendency  has  been  disclosed  in  many  private 
conferences  concerning  standards  of  health  insur- 
ance. 

Nevertheless,  a  strong  inclination  to  include  de- 
pendents is  observable  in  all  compulsory  health-insur- 
ance systems.  The  German  insurance  code  grants 
this  among  the  many  permissible  extensions  of  the 
sphere  of  activity  of  the  sickness  funds,  and  the  ma- 
jority of  the  larger  funds  have  done  so,  as,  for 
example,  in  Leipzig,  Dresden,  Frankfort,  Bremen, 
Hannover,  Diisseldorf,  Strassburg,  Cologne,  Essen, 
Mainz,  Kiel,  etc.  Less  common  is  a  similar  exten- 
sion of  the  drugs  and  supplies  benefit,  but  that,  too, 
is  found  in  many  cities,  such  as  Leipzig,  Dresden, 
Hannover,  Mainz,  and  Kiel,  while  in  Cologne,  Essen, 
and  some  other  cities  half  of  their  cost  is  met  by  the 
fund.  In  Denmark,  though  the  system  is  optional, 
medical  and  hospital  treatment  to  dependent  children 
under  fifteen  years  of  age  is  one  of  the  required  bene- 


MEDICAL  BENEFITS  91 

fits  of  the  recognized  societies.  In  the  British  act 
"  medical  treatment  and  attendance  for  any 
person  dependent  upon  the  labor  of  a  mem- 
ber "  is  the  first  of  the  additional  benefits,  which 
may  be  instituted  by  any  approved  society  which 
shows  a  disposable  surplus  after  valuation,  though 
as  yet  this  British  provision  is  only  a  dead 
letter. 

The  demands  of  life  evidently  appear  stronger  than 
any  theoretical  constructions.  A  purely  formal  con- 
nection between  the  insurance  of  the  wage-worker  and 
that  of  the  members  of  his  family  may  be  lacking,  but 
the  social  advantages  of  utilizing  the  established 
medical  organization  for  the  benefit  of  the  entire 
working  population  are  so  great  that  any  logical 
inconsistency  may  be  calmly  disregarded.  The  draw- 
backs of  the  present  disorganized  system  of  providing 
the  poorer  classes  with  medical  aid  are  so  palpable 
that  it  would  be  criminal  to  leave  it  undisturbed  in 
the  case  of  the  wife  and  children  of  the  breadwinner, 
in  face  of  a  system  established  presumably  for  his 
benefit.  The  entire  purpose  of  this  system  is  to 
eliminate  any  economic  obstacle  to  the  work  of  pres- 
ervation of  life  and  health,  and  surely  the  life  and 
health  of  the  wives  and  of  the  coming  generation  are 
of  social  value  at  least  equal  to  the  life  and  health  of 
the  laborers.  With  from  250,000  to  300,000  children 
dying  annually  in  this  country  under  the  age  of  one, 
another  100,000  before  5,  and  perhaps  some  90,000 


92      STANDARDS  OF  HEALTH  INSURANCE 

in  ages  from  5  to  19,9  the  tremendous  value  of  any 
improvement  in  preventive  as  well  as  curative  medi- 
cine can  hardly  be  exaggerated.  That  the  working- 
man's  family  needs  such  aid  no  less  than  he  it  seems 
unnecessary  to  argue.  And  while  the  families  of  the 
insured  may  not  need  it  more  than  the  rest  of  the 
population,  the  fact  that  a  comprehensive  system 
must  be  organized  for  the  head  of  the  family  is  a 
sufficient  social  argument  for  extending  the  benefits 
to  such  persons  at  least  as  naturally  and  easily  fall 
into  the  same  group. 

Perhaps  some  objection  to  such  extension  may 
come  from  the  medical  profession,  because  this  meas- 
ure would  represent  a  further,  and  for  most  of  them 
a  final,  encroachment  upon  the  domain  of  private 
practice,  as  at  present  conducted.  The  state  will 
have  to  face  this  issue  and  to  decide  whether  the  con- 
ditions of  practice  of  medicine  should  be  adjusted 
to  the  needs  of  the  people's  health  or  whether  these 
should  yield  to  the  conservatism  of  the  medical  pro- 
fession. 

That  as  a  matter  of  fact  the  opposition  to  such 
extension  is  short-sighted,  so  far  even  as  the  interests 
of  the  medical  profession  are  concerned,  will  appear 
when  the  questions  of  medical  organization  are  dis- 
cussed. It  is  sufficient  to  state  at  this  point  that  at 
the  hearing  on  the  Mills  Bill  at  Albany  on  March 

•  The  figures  for  1913,  covering  only  the  registration  area, 
with  65  per  cent  of  the  population,  are:  159,435  under  1  year, 
65,694  at  age  over  1  and  under  5,  and  54,779  at  ages  5  to  19. 


MEDICAL  BENEFITS  93 

14,  1916,  Dr.  Alexander  Lambert,  representing  the 
American  Medical  Association,  urged  such  extension 
of  the  medical  benefits  to  the  family  of  the  insured, 
as  an  amendment  to  the  Mills  Bill. 


VI 
MONEY  BENEFIT 

THE  student  of  social  problems  may  advocate  health 
insurance  largely  with  the  view  toward  its  ultimate 
effects  upon  the  improvement  of  the  health  of  the 
community,  and  often  is  concerned  more  with  the 
organization  and  socialization  of  medicine,  with  the 
provision  for  proper  sanitarium  treatment  which 
may  be  necessary  for  complete  recovery  from  a 
lingering  illness,  etc.,  than  the  immediate  financial 
relief.  The  insured  workman  himself  almost  invari- 
ably looks  upon  the  insurance  plan  from  an  entirely 
different  angle,  and  while  admitting  in  a  half-hearted 
way  that  the  medical  feature  has  its  value,  is  very 
much  more  concerned  with  the  size  of  the  weekly 
benefit  he  may  expect  when  he  is  compelled  to  "  lay 
off "  because  of  ill  health.  This  attitude  is  shown 
by  the  almost  complete  absence  of  the  medical  bene- 
fit from  most  voluntary  sickness  benefit  or  health- 
insurance  schemes  organized  by  the  American  work- 
ing class  (trade  union  benefit  funds,  fraternal  orders, 
etc.)  or  patronized  by  it  (industrial  health  insur- 
ance). In  so  far  as  co-operative  organizations  for 
granting  medical  aid  (lodges,  etc.)  exist,  they  are 
prevalent  chiefly  among  certain  immigrant  elements 

94 


MONEY  BENEFIT  95 

(Russians,  Jews,  Italians),  and  even  then  concern 
themselves  largely  with  the  treatment  of  the  women 
and  children.  The  approval  of  any  scheme  proposed 
by  the  workers  will  largely  depend  upon  the  pro- 
visions for  sick  benefit.  The  size  of  the  latter  will 
determine  whether  the  sick  worker  will  escape  the 
mental  anguish  resulting  from  inability  to  provide 
for  his  family,  whether  illness  will  create  a  financial 
crisis  in  his  status  from  which  recovery  is  painful 
and  slow,  or  whether  it  may  be  weathered  in  a  cheer- 
ful and  optimistic  spirit. 

But  even  from  the  point  of  view  of  preventive  re- 
sults the  level  of  the  sick  benefit  is  a  matter  of  great 
importance.  Unless  it  is  sufficiently  large  to  provide 
at  least  the  urgent  needs,  a  motive  will  remain  to 
return  to  work  long  before  complete  recuperation  has 
taken  place,  and  thus  the  effect  of  the  health-insur- 
ance scheme  in  preserving  life  and  health  will  be 
interfered  with. 

Until  the  advent  of  the  British  national  health- 
insurance  system,  benefits  computed  in  proportion  to 
wages  were  practically  the  uniform  practice  of  com- 
pulsory systems.  The  British  act  was  the  first  to 
introduce  a  uniform  scale  of  benefits  for  all.  The 
practice  of  voluntary  health-insurance  organizations, 
on  the  contrary,  tends  more  toward  uniform  scales. 

Thus  in  the  American  health-insurance  schemes  of 
various  types  the  rate  of  weekly  benefits  is  almost 
universally  a  specified  amount.  Of  the  19  national 
unions  which  had  temporary  disability  provisions  at 


96      STANDARDS  OF  HEALTH  INSURANCE 

the  time  a  federal  investigation  of  these  benefit  fea- 
tures was  made,1  17  granted  $5  a  week,  and  2,  $6  a 
week.  Of  the  346  local  funds  granting  such  benefit? 
described  in  the  same  report,  all  gave  specified  bene- 
fits, varying  between  $2  and  $10,  but  the  pre- 
dominating rate  in  over  one-half  of  them  was  $5  a 
week.  The  same  holds  true  of  most  establishment 
funds,  the  predominating  rate  being  $5  or  $6, 
though  occasionally  it  rose  higher — even  to  $25. 2 

It  does  not  help  much  to  point  out  that  in  the 
British  system  the  contributions  are  uniform  and 
therefore  the  benefits  are  uniform.  That  the  same 
principle  should  govern  both  contributions  and  bene-» 
fits  must  be  conceded  at  once.  But  which  principle 
should  it  be? 

The  comparative  advantages  of  these  two  methods 
of  compensation  or  insurance  have  already  been  dis- 
cussed at  some  length  in  this  country  in  connection 
with  accident  compensation.  The  two  methods  rest 
upon  somewhat  different  theoretical  foundations.  If 
the  sick  benefit  be  considered  in  its  insurance  aspects, 
as  compensation  for  loss  sustained,  the  benefit 
should  be  a  factor  of  wages,  if  it  does  not  cover  the 
entire  loss.  Proportionate  insurance,  when  the  in- 
sured person  (or  the  owner  of  the  insured  property) 
remains  a  co-insurer,  is  known  in  all  branches  of 

1  Twenty-third  Annual  Report  of  the  (U.  8.)  Commissioner 
of  Labor.  "  Workmen's  Insurance  and  Benefit  Funds  in  the 
U.  S.,"  1908,  p.  43. 

*  Twenty-third  Annual  Report  of  the  (U.  S.)  Commissioner 
of  Labor,  n.  409. 


MONEY  BENEFIT  97 

property  insurance.  An  entirely  different  theory  is, 
however,  frequently  advocated,  which  may  be  desig- 
nated as  the  theory  of  social  need.  Social  insurance, 
according  to  this  theory,  does  not  aim  at  individual 
justice,  is  not  concerned  with  an  arithmetically  accu- 
rate restitution  of  loss,  but  with  the  elimination  of 
social  ills — primarily  that  destitution  which  follows 
in  the  wake  of  impaired  health.  In  determining  the 
amount  of  benefits  to  be  granted,  the  decisive  factor 
should  not  be  the  wage  loss  but  the  need  created. 
And  the  basic  need  of  physiological  necessities  does 
not  depend  upon  the  wage  level,  but  possibly  upon 
other  considerations,  such  as  the  size  of  the  family. 
Therefore  the  amount  of  benefit  should  be  uniform, 
or  possibly  be  adjusted  to  the  number  of  dependents. 
But  whatever  the  comparative  merits  of  these  two 
theories,  the  decision  as  to  the  due  course  of  procedure 
is  a  practical  one,  and  must  be  based  on  practical 
considerations. 

A  uniform  scale  has  certain  advantages  of  sim- 
plicity, but  very  few  other  advantages.  The  wage- 
workers  do  not  all  live  according  to  the  same  standard, 
and  presumably  there  is  some  proportion  between 
earnings  and  needs.  It  is  true  that  in  case  of  work- 
ingmen  of  very  low  earning  power  a  benefit  based 
upon  a  fraction  of  wages  may  be  too  small  even  for 
the  essential  demands,  but  provisions  for  a  minimum 
to  meet  this  situation  have  already  become  familiar 
to  American  legislatures  through  compensation  acts. 
On  the  other  hand,  the  flat  uniform  scale  of  benefits 


98      STANDARDS  OF  HEALTH  INSURANCE 

would  either  be  too  high  for  large  groups  of  wage- 
workers  and  offer  an  inducement  to  malingery,  or 
too  low  to  be  a  measure  of  substantial  relief  to  the 
better-paid  workers.  Especially  are  the  arguments 
against  one  uniform  scale  strong  in  the  United  States. 
The  extent  of  wage  variations  is  probably  very  much 
greater  in  this  country  than  in  Europe,  where  fairly 
uniform  conditions  prevail.  Within  one  state  and 
even  one  city,  common  wage  variations  may  be  be- 
tween $4  and  $40  a  week.  Under  such  circum- 
stances the  problem  of  establishing  one  uniform  and 
fair  scale  of  benefit  is  a  difficult  one. 

Judging  from  the  experience  of  our  compensation 
legislation,  the  actual  scale  of  benefits  may  prove  the 
gravest  point  of  contention  when  legislative  work 
seriously  begins.  Comparisons  of  what  is  being  done 
in  Europe  may  be  offset  by  a  natural  tendency  to 
follow  standards  already  established  in  regard  to 
accident  compensation,  since  essentially  the  problems 
are  identical  so  far  as  the  needs  of  the  family  are 
concerned. 

In  European  voluntary  systems  the  benefits,  as  a 
rule,  are  entirely  too  low.  An  insurance  system  re- 
quires a  careful  balancing  of  income  and  outgo,  of 
financial  resources,  and  benefits  payable.  When  re- 
quired to  carry  the  entire  burden  or  when,  as  in  Den- 
mark, receiving  only  a  small  subsidy,  the  insured 
workman  is  unable  to  provide  the  cost  of  liberal 
benefits.  In  Denmark  the  actual  amount  is  left  to 
the  discretion  of  the  fund,  with  a  minimum  limit  of 


MONEY  BENEFIT  99 

40  ore  (11  cents)  per  day,  and  a  maximum  of  two- 
thirds  of  the  wages.  As  a  matter  of  fact  over  70  per 
cent  were  granting  only  40  to  60  ore  (11  to  16  cents) 
and  only  12  per  cent  1  krone  (26.8  cents)  or  a  little 
over.  This  sufficiently  measures  the  limited  efficiency 
of  voluntary  systems.  The  British  scale  is  pretty 
well  known  (10s.  for  men  and  7s.  6d.  for  women,  per 
week,  with  somewhat  reduced  rates  for  certain 
groups).  In  view  of  the  actuarial  rigidity  of  the 
British  law,  there  are  various  other  reductions  to 
be  made  under  all  sorts  of  conditions  which  may 
influence  the  actuarial  solvency  of  the  funds,  for,  since 
the  scale  of  contributions  is  rigid,  adjustment,  ac- 
cording to  the  law,  must  eventually  be  made  through 
reduction  in  the  benefit  scale.  Even  if  the  actuarial 
basis  of  the  system  could  prove  accurate  on  the  aver- 
age, it  was  inevitable  that  shortages  would  be  dis- 
covered, so  that  benefits  may  be  reduced  in  many 
societies.  This  aspect  of  the  situation  will  require 
a  separate  discussion  in  due  place. 

Where  benefits  are  adjusted  in  proportion  to 
wages,  the  usual  amount  is  one-half  of  the  wages, 
as  in  Germany,  though  not  the  actual  wage  of  the 
sick,  but  an  average  or  basic  group  wage,  is  meant. 
Different  basic  wages  for  groups  of  insured  of  the 
same  fund  may  be  provided,  but  the  basic  wage  must 
not  exceed  5  marks  ($1.19)  per  diem.  The  maximum 
normal  sick  benefit  therefore  is  60  cents  per  diem, 
or  $3.60  a  week. 

The  same  50  per  cent  scale  is  found  in  most  other 


100    STANDARDS  OF  HEALTH  INSURANCE 

compulsory  acts,  as  those  of  Hungary,  Russia, 
Luxemburg,  Servia,  and  Roumania,  the  latter,  how- 
ever, trying  to  adjust  the  amount  to  economic 
needs  by  cutting  it  down  to  35  per  cent  for  single 
workers. 

There  is  a  curious  tradition  that  in  matters  of 
social  legislation  we  need  not  go  above  the  minimum 
which  European  experience  indicates.  It  is  well 
known  what  pernicious  influence  the  highly  unsatis- 
factory British  compensation  act  has  exercised  upon 
American  legislation.  The  minimum  German  scale 
of  50  per  cent  should  not,  however,  be  accepted  as 
the  final  word  of  Europe.  Both  Austria  and  Nor- 
way have  made  it  60  per  cent.  Finally  the  most 
recent  act  of  Holland  has  established  a  70  per  cent 
scale.  In  Germany  permission  is  given  by  the  law  to 
increase  the  benefit  up  to  75  per  cent.  Some  10  per 
cent  of  the  German  funds,  representing  a  very  much 
larger  proportion  of  the  membership,  have  increased 
it  to  66  2-3  per  cent,  and  perhaps  some  2  per  cent 
even  to  a  larger  amount  up  to  the  legally  permissible 
limit.  There  is,  therefore,  a  strong  feeling  that  50 
per  cent  is  insufficient,  and  that  the  rate  of  sick  bene- 
fits should  be  raised  to  the  level  of  accident  compen- 
sation. In  the  brief  experience  of  American  com- 
pensation enough  evidence  has  already  accumulated 
to  prove  that  50  per  cent  is  insufficient  to  prevent 
poverty  and  an  appeal  to  charitable  relief.8 

*  See  Three  Tears  Under  the  New  Jersey  Workmen's  Com- 
pensation Law.  Report  of  an  investigation  under  the  direc- 


MONEY  BENEFIT  101 

It  must  be  quite  evident  that  as  far  as  the  economic 
problem  concerned  is  created  it  makes  very  little 
difference  to  the  workman  or  his  dependents  whether 
his  disability  is  due  to  illness  or  an  accidental  injury, 
or,  to  carry  the  point  further,  whether  it  is  due  to 
an  industrial  or  non-industrial  accident,  the  former 
calling  for  compensation  and  the  latter  for  a  sick 
benefit.  And  while  50  per  cent  of  the  wages  still  re- 
mains the  predominating  scale  of  the  American  com- 
pensation acts  (22  acts  out  of  34),  it  equals  55 
Sper  cent  in  Indiana,  60  per  cent  in  Hawaii  and  Texas, 
65  per  cent  in  California  and  Wisconsin,  and  66  2-3 
per  cent  in  Massachusetts,  New  York,  and  Ohio. 
Substantially  the  "  two-thirds  "  scale  has  been  recog- 
nized in  5  states;  the  most  significant  feature  being 
the  change  from  50  per  cent  to  66  2-3  per  cent  in 
Massachuettts  in  1914,  after  only  two  years'  experi- 
mentation with  the  50  per  cent  scale,  which  was  thus 
definitely  pronounced  inadequate. 

It  is  true  that  on  certain  wage  levels  a  two-thirds 
scale  would  be  palpably  insufficient.  Without  going 
here  into  tedious  data  on  wage  statistics,  the  grow- 
ing movement  for  minimum  wage  legislation  is  suffi- 
cient evidence  that  in  many  industries,  especially 
those  employing  female  labor,  the  wages  are  insuffi- 
cient to  provide  even  the  minimum  physiological 
standard.  Very  likely  for  many  members  of  these 

tion  of  the  Social  Insurance  Committee  of  the  American  As- 
sociation for  Labor  Legislation,  New  York,  1915;  especially 
pp.  37-42. 


102    STANDARDS  OF  HEALTH  INSURANCE 

wage  groups  two-thirds  benefit  may  prove  rather 
meager.  The  customary  provisions  for  minimum 
benefits  (usually  $5  or  $6  a  week,  occasionally 
$4,  or  full  wages  when  they  do  not  reach  even  the 
level  of  minimum  benefits)  which  are  so  common  in 
American  compensation  acts  represent  a  distinct 
contribution  to  the  theory  and  practice  of  compen- 
sation. There  is  no  reason  why,  on  the  whole,  these 
provisions  as  to  the  minimum  amounts  should  not  be 
carried  over  into  health-insurance  acts. 

And  yet,  at  the  chance  of  appearing  somewhat  too 
conservative  in  this  matter,  the  writer  feels  con- 
strained to  suggest  that  a  little  greater  care  must 
be  exercised  in  applying  these  minima.  The  one 
possible  objection  to  such  minima  is  the  possibility 
of  the  compensation  or  sick  benefit  equaling  the  nor- 
mal wage  or  so  nearly  approaching  it  that  an  un- 
necessary stimulus  to  malingering  or  simulation,  or 
at  least  what  has  been  called  valitudinarianism  (or 
unconscious  exaggeration  of  ailments),  may  be  cre- 
ated. While  this  danger  is  usually  exaggerated  with 
malicious  intent  to  injure  the  social-insurance  move- 
ment, it  cannot  honestly  be  altogether  denied.  In 
case  of  accidental  injuries  (whether  due  to  industrial 
or  non-industrial  causes)  there  are  usually  objec- 
tive facts,  by  observation  of  which  these  tendencies 
may  be  overcome.  In  health  insurance  the  prob- 
lem is  somewhat  more  difficult  to  meet.  Instead 
of  a  flat  minimum  of  $5,  $6,  or  even  $6.50,  it  may  be 
more  desirable  to  provide  a  sliding  scale,  which  will 


MONEY  BENEFIT 


103 


leave  some  margin  between  the  wages  and  the  sick 
benefit  and  thus  some  economic  motives  for  termina- 
tion of  the  disability  period.  Of  course  a  rational 
sliding  scale  is  difficult  to  construct.  All  such  scales 
must  be  somewhat  arbitrary.  The  following  scale  is 
offered,  not  as  an  ironclad  standard,  but  rather  as  a 
basis  of  discussion  and  an  illustration  of  the  prin- 
ciple involved: 


Weekly 

Normal 

Normal 

Suggested 

Resulting 

Wage 

Rate 

Benefit 

Rate 

Benefit 

$10 

66  f  p.  c. 

$6.67 

66  f  p.c. 

$6.67 

9 

66         " 

6.00 

66  f    " 

6.00 

8 

66  f    " 

5.33 

70  |    " 

5.60 

7 

66  f    " 

4.67 

75  f    " 

5.25 

6 

66  f    " 

4.00 

80  f    " 

4.80 

5 

66  f    " 

3.33 

85  f    " 

4.25 

4 

66f    " 

2.67 

90  f    " 

3.60 

Under  4  66  f      under  2.67      100  f    '       full  wages 

The  principle  of  a  maximum  provision  is  more  easily 
disposed  of.  Such  provision  is  found  in  almost  all 
American  compensation  acts ;  the  usual  levels  are 
$10  or  $12 — only  seldom  do  they  fall  to  $8  (Colo- 
rado) or  rise  to  $15  (Kansas,  Texas)  or  even  higher: 
The  argument  for  such  limitations  is  purely  financial, 
to  save  cost  to  the  employer.  It  has  nothing 
whatever  to  do  with  the  social  theory  of  compensa- 
tion. With  a  scale  of  66  2-3  per  cent,  a  $12  maxi- 
mum hits  every  worker  earning  above  $18;  a  $10 
maximum  hits  even  every  one  earning  over  $15.  Such 
narrow  limits  are  altogether  undesirable.  Since 


104      STANDARDS  OF  HEALTH  INSURANCE 

both  the  benefits  and  contributions  are  based  upon 
a  percentage  of  earnings,  the  limits  are  unfair  to 
the  members  of  these  higher-wage  groups.  But 
a  much  better  and  logical  basis  for  a  maximum 
limit  exists.  We  have  argued  (on  page  38)  that 
clerical  employees  earning  over  $1,200  a  year  (or 
approximately  $23  a  week)  may  be  excluded 
from  the  operations  of  the  compulsory  system. 
Thus  no  clerical  employee  would  receive  more  than 
$15.33  a  week  in  sick  benefits.  No  such  limita- 
tions were  established  for  the  manual  wage-work- 
ers, mainly  because  of  the  fluctuations  and  ir- 
regularity of  the  wage-worker's  earnings.  But  with 
very  good  logic  a  uniform  maximum  sick  benefit  of 
$15  may  be  embodied  in  the  act. 

DURATION   OF   BENEFITS 

How  long  should  sick  benefits  be  payable?  The 
somewhat  artificial  but  necessary  line  of  demarca- 
tion between  sickness  and  invalidity  insurance  has 
already  been  indicated.  Just  at  what  point  the  line 
is  to  be  drawn  must  be  decided  upon  somewhat  arbi- 
trarily. In  Denmark,  recognized  funds  are  required 
to  grant  sick  benefits  for  at  least  13  weeks  within  one 
year.  No  maximum  is  prescribed  by  the  law.  In 
actual  practice,  some  60  per  cent  have  retained  the 
required  minimum,  about  25  per  cent  have  increased 
it  to  various  periods  under  26  weeks,  and  the  remain- 
ing 15  per  cent  have  made  it  just  26  weeks.  Prac- 


MONEY  BENEFIT  105 

tically  no  funds  (with  one  or  two  exceptions)  have 
gone  beyond  this  limit. 

In  Germany,  the  original  minimum  period  was  13 
weeks,  but  was  raised  by  the  act  of  1903  to  26  weeks. 
The  local  funds  have  the  right  to  increase  this  period 
to  52  weeks,  and  may,  in  addition,  provide  for  treat- 
ment of  convalescents  for  another  year.  The  Ger- 
man experience  indicates  that,  with  a  healthy  demo- 
cratic organization  of  sickness  funds,  voluntary  ex- 
tension of  the  minimum  limit  is  not  at  all  rare,  but 
nevertheless  the  legal  requirement  determines  the  pre- 
dominating type.  In  1885,  80  per  cent  of  the  funds 
kept  to  the  minimum  limit,  and  by  1903  about  75  per 
cent,  several  thousand  funds  increasing  the  time  to 
longer  periods  up  to  26  weeks.  Since  the  raising  of 
the  legal  requirement  less  than  1,000  funds  pay  for 
from  26  to  52  weeks,  these  being  largely  establish- 
ment funds. 

In  Great  Britain  the  line  of  demarcation  between 
"  sickness  "  and  "  disablement  "  (invalidity)  benefits 
is  drawn  at  the  conclusion  of  26  weeks. 

In  Austria  and  Hungary  the  limit  is  somewhat 
shorter, — 20  weeks, — though  a  further  extension  of 
this  minimum  requirement  has  been  discussed  for 
nearly  10  years.  Both  in  Norway  and  in  Russia 
the  same  26  weeks'  limit  prevails.  Only  in  Roumania 
it  is  shorter — 16  weeks  only.  European  experience, 
therefore,  places  a  certain  stamp  of  official  approval 
upon  this  dividing  line. 

There  is  no   mysterious   significance  attached  to 


106      STANDARDS  OF  HEALTH  INSURANCE 

the  half-year  period.  But  the  only  logical  basis  for 
determining  the  proper  limit  is  the  separation  of 
cases  of  illness  from  those  of  chronic  invalidity.  A 
13  weeks'  period,  according  to  available  data,  would 
leave  some  3  1-2  per  cent  of  the  cases  without  aid 
perhaps  at  the  time  when  such  aid  is  most  important. 
The  number  of  cases  extending  beyond  26  weeks  is 
only  6  per  1,000,  and  includes  little  besides  cases  of 
chronic  invalidity. 

On  the  other  hand,  the  extension  of  time  from 
13  to  26  weeks  can  be  granted  at  a  comparatively 
slight  cost.  An  analysis  of  statistics  of  the  Leipzig 
fund  (perhaps  the  best  available  and  covering  al- 
most 90,000  cases  of  illness  per  annum)  seems  to  indi- 
cate that  the  additional  number  of  sick  days  which 
become  compensable  because  of  an  extension  from 
13  to  26  weeks  constitutes  only  a  little  over  5  per 
cent  of  the  total.  Protracted  illness  may  require  a 
higher  expenditure  for  expert  medical  aid,  hospitals, 
convalescent  homes,  etc.  In  any  case  the  additional 
loading  must  represent  very  much  less  than  10  per 
cent. 

WAITING  PERIODS 

A  time  limitation,  of  a  somewhat  different  kind, 
is  usually  established  also  for  the  beginning  of  the 
case  of  illness,  known  technically  in  compensation 
legislation  as  a  waiting  period.  With  the  natural 
tendency  to  draw  upon  compensation  experience  in 


MONEY  BENEFIT  107 

shaping  insurance  standards,  the  question  may  be- 
come more  acute  than  it  ever  did  in  Europe.  To 
prevent  administrative  difficulties  out  of  proportion 
to  the  economic  loss  of  very  brief  periods  of  illness, 
and  also  to  prevent  a  certain  form  of  malingering, 
due  to  occasional  debauch,  a  brief  waiting  period  is 
advisable,  during  which  money  benefits  (but  not  medi- 
cal aid)  may  be  denied.  In  Germany  the  law  estab- 
lishes a  3  days'  period,  though  the  local  funds  may 
shorten  or  remove  it  altogether.  The  period  is  also 
placed  at  3  days  in  Great  Britain,  while  in  Denmark 
the  voluntary  funds  are  permitted  (but  not  required) 
to  have  a  waiting  period  up  to  7  days.  Unfortu- 
nately, in  American  compensation  acts  a  longer  wait- 
ing period  (7  days  in  a  few  acts  and  14  days  in  most) 
has  become  the  rule.  A  similar  tendency  in  sickness- 
insurance  acts  is  certain  to  appear.  It  should  be 
energetically  contested. 

The  majority  of  cases  of  illness  would  fall  within  so 
long  a  period,  and  denial  of  benefits  for  all  such  cases 
would  go  far  to  discredit  the  entire  system  in  the  eyes 
of  the  workers.4  Moreover,  there  is  this  distinction 
between  accidents  and  sickness,  that  repeated  injuries 
to  the  same  individual  are  exceptional  while  repeated 
attacks  of  short  periods  of  illness  are  not  at  all  rare. 
Numerous  recent  wage  investigations  have  estab- 
lished beyond  any  doubt  that  the  omission  of  even 

4  According  to  the  experience  of  the  Leipzig  sick  fund  in 
1912,  47.4  per  cent  of  all  cases  lasted  less  than  2  weeks,  after 
excluding  cases  under  3  days. 


108      STANDARDS  OF  HEALTH  INSURANCE 

one  pay  envelope  may  be  a  serious  matter  to  thou- 
sands of  workers,  and  an  interval  of  3  weeks  between 
one  pay  day  and  another  may  often  spell  ruin  to  a 
family  or  call  for  charitable  assistance.  The  watch- 
word of  social  insurance  should  be  "  Not  a  week 
without  a  pay  envelope."  A  3  days'  waiting  period 
is  all  that  the  entire  experience  of  sickness  insurance 
justifies. 

The  same  term  "  waiting  period  "  is  often  used 
to  define  a  different  limitation,  namely  the  re- 
quirement of  a  certain  period  of  insurance  before 
the  right  to  benefits  is  acquired. 

Under  a  voluntary  insurance  system  this  require- 
ment may  be  advisable  as  a  method  of  protecting  the 
funds  against  unfavorable  selection  of  risks.  In  Den- 
mark, the  determination  of  such  a  time  limit  is  left  to 
the  various  funds.  Under  a  compulsory  system  such 
a  waiting  time  is  neither  actuarially  necessary  nor  so- 
cially just,  since  membership  necessarily  follows  upon 
employment,  and  the  average  degree  of  health  of  per- 
sons actually  employed  cannot  be  influenced  by  any 
one  individual's  act.  Nevertheless,  the  British  act 
provides  that  no  sickness  benefits  can  be  paid  until 
the  expiration  of  26  weeks  of  paid-up  insurance.  It 
will  be  remembered  that  the  actual  payments  of  bene- 
fits did  not  begin  until  6  months  after  the  collection 
of  contributions  began,  and  in  this  way  a  substantial 
working  capital  was  accumulated.  As  a  temporary 
fiscal  measure,  this  may  have  been  justified,  though 
some  doubt  may  be  entertained  whether  the  advan- 


MONEY  BENEFIT  109 

tages  derived  proved  a  sufficient  compensation  for  the 
amount  of  popular  irritation  created.  The  preserva- 
tion of  the  same  rule  seems  much  less  justified.  How- 
ever, since  membership  is  compulsory  and  only  one 
waiting  period  during  the  entire  life  of  the  insured  is 
required,  the  regulation  will  affect  only  very  young 
persons,  and  the  amount  of  distress  caused  by  this 
provision  is  probably  small. 

Finally,  the  German  law  specially  prohibits  any 
provision  for  a  waiting  period  of  this  character, 
though  in  case  of  voluntary  members  a  period  not  to 
exceed  6  weeks  is  permitted.  Here  again  the  Ger- 
man precedent  is  the  one  that  should  be  followed. 

Of  course  the  possibility  of  imposing  upon  the 
health-insurance  fund  if  not  for  feigned  illness  then 
at  least  for  chronic  disability  or  invalidity  is  not 
entirely  eliminated  by  making  insurance  automati- 
cally follow  employment.  If  insurance  is  thus  made 
to  lose  all  aspects  of  a  voluntary  act,  employment 
does  not.  If  insurance  with  all  its  benefits  be  made 
to  follow  employment  no  matter  how  short,  and  since 
26  weeks  of  sick  pay  is  one  of  the  benefits,  2  weeks 
of  work  during  the  year  might  create  the  right  to 
52  weeks  of  sick  benefits  and  thus  invalidity  insurance 
be  smuggled  into  the  system.  Even  a  true  invalid  for 
whom  regular  employment  is  either  impossible,  or  if 
possible,  decidedly  injurious,  may  make  the  extraor- 
dinary effort  to  return  to  work  for  a  week  or  two 
if  in  this  way  all  his  benefit  rights,  already  expired 
through  time  limits,  might  be  renewed. 


110      STANDARDS  OF  HEALTH  INSURANCE 

It  becomes  necessary,  therefore,  to  establish  other 
limitations  of  a  somewhat  involved  nature,  so  as  to 
prevent  the  abuse  of  the  system  by  the  clever  and  in- 
genious few.  It  is  not  only  the  financial  loss,  perhaps 
actuarially  slight,  that  is  involved.  But  nothing  in- 
jures the  popularity  of  any  act  of  social  legislation, 
especially  in  its  initial  stages,  as  does  evidence  that 
it  permits  abuses  and  invites  deception. 

The  British  rule  in  respect  of  this  problem  is  rather 
complicated.  Since  the  British  system  provides  for 
both  invalidity  and  sick  benefits,  the  extent  beyond  the 
initial  26  weeks  results  (after  the  invalidity  or 
"  disablement  "  benefits  were  put  into  force)  not  in 
the  discontinuance  but  only  reduction  of  the  weekly 
benefit.  But  suppose  a  short  period  of  employ- 
ment intervenes.  Shall  the  following  period  of  ill- 
ness be  compensated  for  as  sickness  (10*.)  or  dis- 
ablement (5s.)?  The  rule  established  by  the  act 
demands  that  consecutive  (even  if  interrupted) 
periods  of  disability  be  counted  as  one,  unless  a  period 
of  50  weeks  of  actual  employment  and  50  contribu- 
tions has  intervened. 

It  is  questionable  whether  this  rule  would  always 
work  out  fairly  to  the  insured.  Suppose  he  were 
subject  to  short  periods  of  illness  interrupted  by 
more  or  less  prolonged  periods  of  employment.  If 
these  periods  were  each  much  less  than  50  weeks 
long,  then  sooner  or  later  the  26  weeks  would  be  ex- 
hausted, and  subsequent  benefits  would  be  only  at 
half  the  regular  rate. 


MONEY  BENEFIT  111 

Surely  there  would  be  no  justice  in  such  an  arbi- 
trary limitation.  Compare  it  with  the  extremely 
liberal  provisions  of  the  German  Insurance  Code  on 
the  same  point.  The  organic  provision  establishes 
no  limitation  except  that  consecutive  benefits  in  any 
one  case  are  not  paid  for  over  26  weeks  (Article 
183).  By  another  provision  (Article  188)  the  sepa- 
rate insurance  carriers  are  only  permitted  (not  re- 
quired) to  embody  within  their  constitution  a  rule 
that  after  sick  benefits  are  paid  for  26  weeks  (either 
successively  or  collectively  during  12  months)  the 
benefits  for  the  next  12  months  for  a  new  case  of 
illness  shall  be  limited  to  13  weeks.  Even  this  mild 
restriction  is  inapplicable  when  the  new  case  of  illness 
has  no  connection  at  all  with  the  old  illness. 

With  such  differences  in  standards  to  face  us,  the 
decision  as  to  the  right  rule  must  be  based  upon 
a  priori  reasoning  rather  than  precedent.  The  ob- 
ject of  the  rule  is  to  prevent  invalidity  benefits  to 
be  paid  under  the  disguise  of  sick  benefits.  It  should 
not  aim  at  the  innocent  sufferer  who  happened  to  be 
hit  by  two  consecutive  cases  of  illness  in  rapid  suc- 
cession. It  only  requires  that  the  new  case  be  com- 
pensated on  the  basis  of  a  bona  fide  recovery  and 
return  to  work  after  the  earlier  illness.  A  single  rule 
that  not  over  26  weeks  of  money  benefits  be  paid 
during  any  consecutive  12  months  may  produce  the 
desirable  results,  though  it  may  leave  6  months  fol- 
lowing the  receipts  of  the  maximum  benefit  prac- 
tically without  coverage.  The  German  rule,  that 


112      STANDARDS  OF  HEALTH  INSURANCE 

this  particular  limitation  may  be  entirely  disregarded 
when  the  new  case  represents  an  entirely  new  illness 
and  not  a  failure  of  the  older  one  to  recover,  would 
seem  to  be  worthy  of  emulation,  as  essentially  fair. 
Private  insurance,  whether  of  persons  or  property, 
may  well  have  the  advantage  of  canceling  risks  with 
bad  experience  because  its  entire  success  often  de- 
pends upon  an  efficient  selection  of  superstandard 
risks,  and  because  without  this  selective  process  it 
would  fall  a  ready  victim  to  adverse  selection  of  sub- 
standard ones.  But  compulsory  public  insurance 
must  waive  the  privilege  of  selection,  just  as  it  is 
free  from  any  serious  danger  of  adverse  selection. 

SICK   BENEFITS   IN   CONNECTION    WITH    HOSPITAL    CARE 

It  is  not  the  intention  of  the  writer  to  lumber  up 
this  discussion  of  broad  essential  standards  with 
questions  of  detail  and  minor  importance. 

But  it  is  important  to  discuss  at  this  place  at 
least  briefly  one  or  two  aspects  as  yet  not  touched 
upon.  Medical  aid  in  our  scheme  is  furnished  in  kind. 
The  cash  benefit  is  given  to  furnish  food  and  other 
necessities.  But  suppose  the  patient,  on  account  of 
the  gravity  of  his  situation,  has  been  removed  to  a 
hospital,  where,  in  addition  to  medical  attendance 
and  supplies,  fuel  and  shelter  are  also  provided? 
Shall  the  sick  money  benefit  go  on  in  the  same  way, 
even  though  perhaps  not  needed?  And  if  it  be  discon- 
tinued how  shall  the  needs  of  the  family  be  met? 


MONEY  BENEFIT  113 

The  argument  is  often  made  in  favor  of  discontinu- 
ance that  the  cost  of  hospital  attendance  is 
usually  higher  than  the  combined  cost  of  the  sick 
benefit  and  ordinary  medical  aid.  It  is  very  doubt- 
ful whether  this  plea  is  at  all  correct  if  cases  of  suffi- 
cient gravity  be  compared,  because  a  hospital  may 
furnish  the  necessary  variety  of  medical  aid  appli- 
ances and  nursing  very  much  cheaper  than  could  be 
done  in  a  private  home.  But  the  argument  is  alto- 
gether irrelevant  actuarially,  so  long  as  the  hospital 
benefit  is  granted  as  an  additional  benefit  and  not 
in  substitution  for  other  benefits. 

The  answer  to  the  problem  must  be  based  primarily 
upon  social  considerations.  What  is  needed  in  the 
cases  concerned?  And  what  are  the  results  of  this  or 
that  policy  that  may  be  expected?  Obviously,  the 
single  man,  without  dependents,  has  no  need  of  his 
full  money  benefit  while  staying  in  the  hospital,  per- 
haps has  no  urgent  need  of  any  sick  benefit  at  all. 

The  case  is  very  different  if  the  patient  has 
a  family  or  other  dependents.  The  sick  benefit  is 
intended  to  compensate  them  as  well  as  the  workman 
himself,  and  hospital  care  to  the  latter  will  .not  feed 
the  hungry  wife  and  children.  In  such  cases  the  Ger- 
man law  prescribes  the  payment  of  one-half  the  regu- 
lar benefit  (usually  one-fourth  of  the  wages)  to  the 
dependents  directly.  The  bill  of  the  American  Asso- 
ciation of  Labor  Legislation  (known  in  New  York  as 
the  Mills  Bill)  followed  this  standard,  requiring  the 
payment  of  a  benefit  equal  to  33  1-3  per  cent  of  the 


114      STANDARDS  OF  HEALTH  INSURANCE 

wages.  Criticism  of  this  amount  as  utterly  inadequate 
has  already  reached  the  writer,  and  the  justice  of 
the  criticism  must  be  admitted.  Few  wages  there 
are,  of  which  a  third  would  provide  even  for  the  bare 
necessaries  of  an  average-sized  family.  Besides,  not 
the  cost  of  the  ill  workman's  stay  in  a  hospital,  but 
rather  the  possible  saving  effected  by  the  family  on 
account  of  his  absence,  should  be  the  basis  of  the  re- 
duction of  the  normal  sick  benefit  to  a  lower  level. 
Surely  the  married  workman  does  not  claim  one- 
half  of  the  normal  expenditures  of  a  normal  family. 
Even  one-fourth  would  be  a  fairly  liberal  estimate. 
And  from  this  point  of  view  a  reduction  of  the  sick 
benefit  from  66  2-3  per  cent  to  50  per  cent  would  be 
all  that  is  justified. 

There  is,  however,  another  circumstance  to  be 
taken  into  consideration.  What  is  the  possible  in- 
direct effect  of  any  decision  upon  this  point  upon 
the  willingness  of  the  patient  to  go  to  a  hospital? 
It  is  difficult,  even  somewhat  cruel,  to  send  him  to 
the  hospital  against  his  wishes,  though  sometimes 
it  may  be  absolutely  necessary  for  his  own  good 
(serious  operation)  or  the  good  of  his  neighbors 
(infectious  disease).  But  it  is  undesirable  to 
stimulate  a  tendency  to  go  to  the  hospital  when  con- 
ditions do  not  call  for  it.  It  is  an  unnecessary  ex- 
pense. It  may  preoccupy  necessary  hospital  space. 
Of  course  this  should  be  regulated  by  special  admin- 
istrative measures.  But  the  indirect  effect  of  eco- 
nomic motive  is  difficult  to  counteract.  If  the  family 


MONEY  BENEFIT  115 

may  benefit  financially  by  the  transfer  of  the  patient 
to  the  hospital,  this  will  be  done  frequently.  If,  on 
the  other  hand,  the  removal  to  the  hospital  would 
mean  a  starvation  allowance  for  the  family,  this  will 
be  resisted  even  while  seriously  needed.  From  this 
point  of  view  the  "  one-half  of  regular  benefit  "  pro- 
vision may  work  extremely  unfairly,  and  a  reduction 
of  only  one- fourth  or  at  most  one- third  ( from  66  2-3 
per  cent  to  44  1-3  per  cent,  or  roughly  45  per  cent) 
is  very  much  more  consistent.  Again,  here  too  a 
sliding  scale  may  be  constructed  of  33  1-3  for  the 
wife,  without  children  or  other  dependents,  and  an 
additional  8 1-3  per  cent  for  each  additional  de- 
pendent up  to  the  maximum  50  per  cent.  The  ques- 
tion is  one  of  detail,  to  be  sure.  But  it  is  upon  a  mass 
of  such  details  that  the  success  of  every  legislative 
act  depends. 


VII 
MATERNITY  BENEFIT 

WITHIN  recent  years  maternity  insurance  has  ac- 
quired the  dignity  of  a  separate  branch  of  social 
insurance.  An  enormous  literature  has  grown  up 
concerning  it,1  and  the  demands  for  it,  especially 
from  the  radical  branch  of  the  modern  woman's  move- 
ment, are  insistent.  It  is  significant,  for  instance,  that 
it  was  to  represent  one  of  the  important  questions 
to  be  taken  up  by  the  International  Socialist  Con- 
gress which  was  to  gather  at  Vienna  in  August  of 
1914.  And  yet  curiously  enough,  with  two  or  three 
exceptions,  maternity  benefits  in  actual  practice  con- 
stitute one  of  the  services  of  a  compulsory  health- 
insurance  plan. 

1  The  most  exhaustive  work  on  maternity  insurance  by  Ma- 
dame Alexandra  Kollontai,  which  has  recently  appeared,  is 
unfortunately  written  in  Russian,  and  thus  not  available  to 
the  average  American  reader  (State  Insurance  of  Mother- 
hood, being  Vol.  I  of  Society  and  Motherhood,  in  Rus- 
sian. Petrograd,  1916,  pp.  641).  It  also  contains  a  splendid 
bibliography  of  Russian,  German,  English,  French,  Italian, 
and  Finnish  works.  The  writer  is  informed  by  Mrs.  Kollontai 
that  a  German  edition  of  the  work,  nearly  ready,  was  inter- 
rupted by  the  war,  but  may  eventually  appear.  See  also  the 
selected  bibliography  compiled  by  Dr.  Lee  K.  Frankel  ("  Ma- 
ternity Insurance,"  New  York  Medical  Journal,  Dec.  18,  1915). 

116 


MATERNITY  BENEFIT  117 

The  Italian  method  of  handling  its  problem 
through  an  independent  system  and  institution  has 
been  frequently  described  in  American  literature.2 
In  addition  France  and  Australia  have  established 
independent  systems  of  maternity  benefits,  of  which 
more  will  be  stated  presently.  In  none  of  these  coun- 
tries, however,  does  a  general  compulsory  health- 
insurance  system  exist.  But  wherever  both  general 
compulsory  sickness  insurance  and  maternity  insur- 
ance exist,  they  are  found  combined  into  one  adminis- 
trative system.  Furthermore,  it  is  also  true  that 
maternity  benefits  of  some  kind  or  other  are  given 
practically  in  connection  with  every  existing  sys- 
tem of  compulsory  health  insurance.  Besides  the  ad- 
ministrative advantages  of  such  a  combination  of 
functions,  the  inherent  relationship  is  quite  obvious, 
at  least  as  far  as  the  short  period  of  child-bearing  is 
concerned.  The  question  whether  child-bearing,  be- 
ing a  physiological  process,  should  be  properly  classi- 
fied with  sickness  is  a  somewhat  academic  one.  It 
requires  medical  aid.  It  produces  temporary  dis- 
ability. That  is  sufficient  to  put  it  into  the  category 
of  emergencies  that  a  health-insurance  system  should 
deal  with. 

But  the  fact  that  an  independent  campaign  for 
maternity  insurance  exists  and  in  some  countries 
existed  10  or  20  years  indicates  specific  economic 
causes  which  force  this  problem  upon  the  civic  body 
in  industrial  states. 

*See  Frankel's  bibliography. 


118      STANDARDS  OF  HEALTH  INSURANCE 

The  function  of  maternity  insurance  may  be  ana- 
lyzed under  the  following  five  headings,  correspond- 
ing to  the  five  causes  of  economic  loss,  connected 
with  childbirth:  (o)  extraordinary  expenditures  for 
medical  aid  and  supplies  connected  with  childbirth; 
(6)  the  period  of  enforced  idleness  and  the  conse- 
quent loss  of  wages;  (c)  the  necessary  period  of  rest 
before  childbirth,  to  preserve  the  health  of  the 
mother;  (d)  the  equally  necessary  period  of  rest 
after  childbirth,  for  the  purpose  of  both  strengthen- 
ing the  mother  and  improving  the  chances  of  the  child ; 
and  (e)  the  assumed  "  right  of  the  child  to  its 
mother,"  which  right  and  need  can  only  be  satisfied 
by,  at  the  least,  temporary  withdrawal  of  the  work- 
ing mother  from  regular  remunerative  employment. 
It  is  in  the  last,  fifth  function  that  the  limits  of 
health  insurance,  or  at  least  sickness  insurance,  are 
crossed.  For  the  period  during  which  the  newborn 
child  may  profit,  first  by  breast  feeding  and  subse- 
quently by  personal  attendance  of  its  mother,  ex- 
tends perhaps  for  years,  and  surely  far  beyond 
inevitable  disability  of  the  mother. 

Thus  maternity  insurance,  or  perhaps  its 
broader  form,  motherhood  insurance,  may,  theo- 
retically, merge  into  state  endowment  of  mother- 
hood. It  is  from  this  broader  point  of  view  that 
maternity  insurance  is  advocated  by  the  radical 
feminists  of  Europe,  as  a  transitory  step  to  a  much 
more  comprehensive  system  of  prolonged  mother- 
hood pensions.  State  endowment  of  motherhood 


MATERNITY  BENEFIT  119 

is  advanced  not  only  as  a  measure  of  economic  ne- 
cessity for  prevention  of  destitution,  but  also  as  a 
social  measure  "  aiming  at  the  emancipation  of  the 
child-bearing  woman  from  her  economic  dependence 
upon  man." 

At  this  place,  however,  it  is  unprofitable  to  enter 
into  the  discussion  of  that  broad  and  fascinating 
problem.  Maternity  insurance  is  analyzed  here  only 
as  an  aspect  of  disability  or  sickness  insurance,  and 
if  a  technical  distinction  is  desirable,  such  may 
readily  be  drawn  between  maternity  insurance  (cov- 
ering the  act  of  childbirth  and  the  short  periods  of 
time  immediately  preceding  and  succeeding  it — i.  e., 
the  disability  more  or  less  directly  connected  with 
child-bearing)  and  motherhood  insurance,  (covering 
the  female  function  of  child-rearing).  The  line  of 
distinction  is  not  hard  and  fast,  it  may  be  even 
called  arbitrary,  but  this  it  shares  with  most  artificial 
lines  of  distinction,  such  as  for  instance  the  dis- 
tinction between  sickness  and  invalidity  drawn  at  the 
expiration  of  26  weeks  of  disability. 

But  even  within  this  narrower  limitation,  maternity 
benefits  have  several  features  distinct  from  ordinary 
health  insurance,  because  the  prophylactic  factor  is 
of  greater  importance  and  because  the  interests  of 
the  future  generation  are  also  directly  concerned, 
for  neglect  within  the  first  weeks  or  months  of  the 
infant's  life  is  a  strong  factor  of  infant  mortality. 

There  are  three  distinct  aspects  to  the  economic 
*  See  Kollontai,  loc  cit.,  p.  230. 


120      STANDARDS  OF  HEALTH  INSURANCE 

problem  confronting  the  mother  in  the  wage-working 
class:  (1)  that  of  the  married  woman  worker  who 
combines  the  duty  of  a  wage-earner  with  those  of  a 
housewife,  or  at  least  a  wife,  and  is  in  most  cases  only 
partially  dependent  upon  her  earnings;  (2)  that  of 
the  unmarried  wage-earning  mother;  (3)  that  of  the 
wage-earner's  wife  who  is  "  not  gainfully  employed  " 
in  the  sense  of  not  bringing  any  money  revenue  into 
the  family  treasury. 

The  distinction  between  the  first  and  second  aspects 
is  largely  a  moral  one,  that  between  the  first  two 
and  the  third  primarily  an  economic  one.  The  moral 
problem  involved  should  be  easily  disposed  of. 

Within  the  last  decade  a  noticeable  revolution  has 
taken  place  in  the  moral  viewpoint,  if  not  the  moral 
philosophy,  of  American  society,  which  is  at  least 
bold  enough  to  face  sex  problems  frankly.  The  un- 
married mother  is  in  Europe  a  significant  social  fact, 
and  numerically  an  important  factor  in  its  popula- 
tion. In  Germany,  for  instance,  some  180,000  chil- 
dren,— 8  per  cent  of  the  total, — are  annually  born 
out  of  wedlock.  As  is  to  be  expected,  the  wage- 
working  woman,  or  at  least  the  woman  of  the  wage- 
working  class,  shows  the  highest  rate  of  illegitimacy. 
Whether,  as  the  radical  feminist  wing  is  ready  to  as- 
sert, this  represents  an  active  and  powerful  tendency 
for  abolition  of  the  "  bourgeois  "  family  and  the  as- 
sertion of  the  "  free  woman's  right  to  motherhood," 
or  is  the  result  of  the  breakdown  of  moral  standards 
due  to  poverty,  ignorance,  and  overwork,  as  an 


MATERNITY  BENEFIT  121 

American  social  worker  would  insist,  makes  much  less 
difference  than  the  vital  fact  that  these  180,000 
women  are  mothers  and  that  the  "  illegitimate  babies  " 
have  a  right  to  grow  into  healthy  and  useful  citi- 
zens of  their  country. 

Motherhood  out  of  wedlock  is  by  far  not  as  fre- 
quent here  as  it  is  in  Europe,  but  so  long  as  it  exists 
the  economic  consequences  must  be  provided  for. 
The  social-insurance  movement  has  or  should  have 
no  official  point  of  view  on  matters  of  sexual  morality. 
The  important  thing  is  that  the  unmarried  mother's 
health  and  her  child's  life  must  be  taken  care  of. 
The  economic  need  in  her  case  is  greatest.  The  only 
fair  way  of  handling  this  problem  is  by  entirely  omit- 
ting in  the  act  any  reference  to  distinctions  between 
legitimate  and  illegitimate  births. 

As  between  the  employed,  self-supporting  woman 
and  the  dependent  wife  of  a  wage-worker,  there  are 
material  economic  differences.  In  most  cases  of  the 
latter  type  economic  losses  resulting  from  enforced 
idleness  are  not  so  large  or  important,  except  pos- 
sibly for  the  cost  of  hiring  some  help  during  a  short 
period,  when  neighborly  help  is  lacking,  and  the  nu- 
merous purchases  that  must  be  made  for  the  sake  of 
the  infant.  Therefore,  the  main,  pressing  need  is 
for  medical  aid  and  supplies,  and  this  may  be  inter- 
preted sufficiently  broadly  to  include  most  of  those 
extraordinary  expenditures. 

A  careful  study  of  the  literature  of  maternity  in- 
surance, especially  the  literature  in  advocacy  of  the 


122      STANDARDS  OF  HEALTH  INSURANCE 

measure,  proves  that  the  explanation  of  the  move- 
ment must  be  looked  for  primarily  in  the  recent 
development  of  female  wage-labor.  Maternity  insur- 
ance forms  a  natural  sequel  to  legislation  prohibiting 
wage-work  to  women  for  some  definite  time  before 
and  after  maternity. 

The  argument,  repeated  in  hundreds  of  pamphlets 
and  supported  by  a  wealth  of  statistical  and  physio- 
logical data,  though  essentially  obvious  and  scarcely 
calling  for  proof,  is  that — 

1.  Wage-work,    calling   for   strenuous    and  pro- 
tracted effort,  is  injurious  to  the  prospective  mother 
at  least  for  some  time  before  childbirth. 

2.  Anything    which    injures    the    health    of    the 
mother  also  injures  the  health  of  the  child  about  to  be 
born. 

3.  Breast  feeding  by   a  healthy  mother  is  the 
most  important  factor  preventing  infant  mortality, 
which  even  in  civilized  Germany  reaches  15  per  cent 
during  the  first  year  of  the  infant's  life. 

For  the  wife  of  a  steadily  employed  working-man 
the  problem  of  childbirth  may  not  be  so  critical  and 
tragic,  at  least  in  the  majority  of  cases.  But  even 
within  its  narrower  limitations,  a  real  problem  exists 
at  least  in  some  countries.  To  one  who  may  be  in- 
clined to  doubt  it,  the  perusal  may  be  recommended 
of  a  little  book,4  recently  published  in  England,  con- 
taining 160  simple  letters  from  working-men's  wives, 

*  Maternity.  Letters  from  working-women  collected  by  the 
Women's  Cooperative  Guild.  London,  1915. 


MATERNITY  BENEFIT  123 

describing  the  horrible  conditions  of  discomfort, 
want,  mental  anguish,  ignorance,  and  neglect,  under 
which  to-day  children  are  born  in  England,  condi- 
tions leading  to  fearful  infant  mortality  on  one  side 
and  lifelong  suffering  and  invalidism  of  mothers  on 
the  other. 

How  great  the  need  for  relief  of  these  conditions 
is  in  Europe,  the  rapid  development  of  maternity 
insurance  demonstrates.  But  as  to  the  actual  meth- 
ods and  results  there  is  a  considerable  variety  in 
European  practice.  In  fact,  altogether  14  sys- 
tems of  maternity  insurance  may  at  present  be  rec- 
ognized, and  10  of  them  are  in  connection  with  com- 
pulsory health-insurance  systems  (Germany,  Aus- 
tria, Hungary,  Great  Britain,  Russia,  Norway, 
Bosnia-Herzegovina,  Servia,  Roumania,  Luxem- 
burg). Italy  has  an  independent  system  of  com- 
pulsory maternity  insurance,  in  Switzerland  ma- 
ternity insurance  is  a  feature  of  the  comprehen- 
sive but  voluntary  sickness-insurance  system,  and 
finally  France  and  Australia  have  recently  taken 
a  new  step  in  "  social  insurance  "  by  providing  non- 
contributing  state  pensions  to  lying-in  women. 

So  far  as  our  three  selected  types  of  legislation  are 
concerned,  very  little  has  been  accomplished  in  the 
voluntary  system  of  Denmark.  Lying-in  benefits  are 
not  required  by  law,  and  as  a  rule  are  not  given  by 
the  recognized  societies  beyond  the  medical  aid  neces- 
sary in  case  of  unusual  complications.  Attendance 
by  physicians  at  childbirth  is  not  common  in  Euro- 


124      STANDARDS  OF  HEALTH  INSURANCE 

pean  countries.  A  few  societies  provide  insured 
women  with  the  service  of  a  midwife. 

In  Germany  a  substantial  lying-in  benefit,  amount- 
ing to  a  sickness  benefit  for  8  weeks,  is  required  by 
law  for  all  insured  women,  no  distinction  being  made 
between  married  and  unmarried  mothers.  With  the 
consent  of  the  lying-in  woman,  medical  attendance, 
services  of  midwife,  or  nurse,  or  hospital  care,  may 
be  substituted  for  the  entire  maternity  benefit,  or 
parts  of  it.  Special  pregnancy  benefits,  in  case  of 
incapacity  up  to  6  weeks,  are  among  the  optional 
benefits  allowed  by  the  sick  fund,  as  also  the  exten- 
sion of  benefits  to  the  wives  of  insured  persons. 

The  maternity  benefits  of  the  British  law  have  oc- 
casionally been  referred  to  as  the  most  liberal  in 
Europe,  but  that  is  hardly  correct.  The  basic  ma- 
ternity benefit  is  a  flat  amount  of  30  shillings,  but 
this  is  payable  both  to  the  insured  women  and  to  the 
wives  of  insured  men.  However,  in  Hungary,  Servia, 
Roumania,  and  Norway  as  well,  maternity  benefits 
to  wives  of  insured  persons  are  compulsory.  In  ad- 
dition to  the  30  shillings,  insured  women  are  entitled 
also  to  the  regular  sickness  benefit  during  confine- 
ment. The  80-shilling  provision  is  entirely  free  from 
any  moral  strings;  all  wives  (or  widows  in  case  of 
posthumous  children)  of  insured  persons,  and  all  in- 
sured women  are  entitled  to  it.  Curiously  enough, 
however,  the  additional  sickness  benefit  just  referred 
to  is  payable  only  if  the  "insured  woman"  is  married. 
Some  discrimination  against  the  unmarried  mother 


MATERNITY  BENEFIT  125 

was   after   all  dragged  in  to   satisfy   Anglo-Saxon 
moral  standards. 

Neither  Germany  nor  Great  Britain  thus  furnishes, 
at  least  in  its  laws  (German  practice  being  on  the 
whole  very  much  better  than  the  minimum  require- 
ments of  the  law),  the  best  that  Europe  can  show  in 
the  development  of  this  movement.  Neither  in  Great 
Britain  nor  in  Germany  is  proper  medical,  or  rather 
obstetrical,  aid  required.  Indeed,  the  British  act 
specifically  states  that  "  medical  benefit  shall  not  in- 
clude any  right  to  medical  treatment  or  attendance 
in  respect  of  a  confinement." 

As  a  matter  of  fact,  that  is  probably  the  main  pur- 
pose to  which  the  money  benefit  is  applied.  But  is 
not  this  purpose  sufficiently  important  to  be  achieved 
directly?  Under  the  present  system  two  results  are 
often  observed  in  England:  the  physician's  fees  have 
increased,  and  instead  of  a  guinea,  all  the  30  shillings 
is  charged  frequently ;  or  the  woman  in  her  ignorance 
may  be  tempted  to  save  on  medical  aid,  or  on  foods 
necessary  to  her,  for  the  purpose  of  utilizing  the 
ready  cash  for  other  purposes.  Neither  of  the  two 
results  is  socially  desirable.  Proper  attendance  at 
childbirth  is  a  matter  of  primary  importance  to  pre- 
serve the  life  and  health  of  both  mother  and  child. 
So  long  as  the  very  existence  of  a  health-insurance 
system  presupposes  some  efficient  and  economic  or- 
ganization of  medical  aid,5  why,  in  this  branch  of 
medical  service,  shall  all  the  faults  of  private  bar- 
•  See  Chapter  XIV,  "  Organization  of  Medical  Aid." 


126      STANDARDS  OF  HEALTH  INSURANCE, 

gaining  be  left  undisturbed?  Maternity  insurance 
is  not  meant  to  result  mainly  in  a  swelling  of  ob- 
stetricians' fees. 

Nothing  can  be  more  readily  estimated  than  the 
approximate  number  of  births,  and  nothing  can, 
therefore,  be  more  easily  provided  for  in  advance. 
In  Austria,  in  Hungary,  in  Russia,  in  fact  in  almost 
all  the  compulsory  systems  enumerated  above,  such 
medical  aid  is  required.  It  should  not  be  forgotten 
that  annually  in  the  United  States  some  15,000 
women  lose  their  lives  from  childbirth  or  various  con- 
ditions connected  therewith,6  and  that  the  number 
of  those  whose  health  is  impaired  because  of  unskilled 
aid  is  very  much  larger. 

It  seems  scarcely  necessary  to  argue  that  medical 
aid  is  needed  for  the  wage-worker's  wife,  as  well  as 
for  the  woman  who  is  a  wage-worker  herself.  The 
problems  which  arise  in  England,  as  to  whether  the 
30  shillings  should  be  paid  to  the  insured  husband  or 
his  child-bearing  wife,  whether  in  a  case  of  a  dissi- 
pated husband  the  proper  use  will  always  be  made 
of  the  30  shillings,  etc.,  could  be  easily  avoided,  if 
30  shillings'  worth  of  efficient  expert  obstetrical 

•According  to  mortality  statistics  for  1913,  10,010  deaths 
occurred  from  various  causes  connected  with  the  puerperal 
state  (4,542  from  puerperal  septicemia,  2,397  from  puerperal 
albuminuria,  and  3,071  from  other  causes).  The  death  regis- 
tration area  of  the  United  States  for  1913  contained  the 
population  of  63,298,718  or  65.1  per  cent  of  the  entire  popu- 
lation. The  total  number  of  deaths  from  this  cause  may  there- 
fore be  estimated  at  10,010  ~  .651  =  15,376. 


MATERNITY  BENEFIT  127 

service  and  necessary  supplies  were  furnished  in- 
stead of  money.  For  the  woman  who  is  self-sup- 
porting, the  additional  money  benefit,  no  matter 
how  designated,  is  equally  necessary.  The  "  twi- 
light sleep "  is  still  in  its  experimental  stages, 
and  even  for  the  thoroughly  healthy  woman  child- 
bearing  means  enforced  incapacity  to  earn  a  liv- 
ing for  many  weeks  at  least. 

As  to  the  duration  of  these  benefits  laws  again 
differ.  The  Italian  law  of  1911  establishing  com- 
pulsory maternity  benefit  resulted  from  a  labor  law 
prohibiting  employment  of  women  within  four  weeks 
after  childbirth.  Of  12  countries  granting  maternity 
benefits  the  required  period  is  4  weeks  in  six,  6  weeks 
in  five,  8  weeks  in  two  (Germany  and  France).  Some- 
where between  4?  and  8  weeks  must,  therefore,  be  the 
minimum  period  of  enforced  rest  after  childbirth. 

Under  normal  conditions,  6  or  even  4  weeks  after 
birth  should  be  sufficient  as  far  as  the  mother's  health 
is  concerned.  But  while  a  good  many  prospective 
mothers  may  retain  their  perfect  health  until  the  last 
day  before  delivery,  as  a  rule  earning  capacity 
stops  some  time  earlier,  nor  is  strenuous  effort  dur- 
ing the  last  few  weeks  quite  safe  to  either  the  mother 
or  the  child.  The  German  law  permits  at  least  2 
weeks'  benefit  before  childbirth,  the  Russian  act  2, 
and  the  French  4»  weeks.  These  periods  are  included 
in  the  total  period  indicated  above,  but  in  several 
countries  the  law  permits  optional  extension  of  bene- 
fits to  pregnant  women  for  longer  periods. 


128      STANDARDS  OF  HEALTH  INSURANCE 

Finally,  the  interests  of  the  child  would  require 
at  least  some  extension  of  time  after  the  necessary 
period  of  recuperation  for  the  mother.  During  this 
period  breast  feeding  may  be  kept  up,  and  some  care 
given  at  the  time  when  it  is  most  important.  In  Ger- 
many, such  extension  up  to  6  weeks  is  permitted. 
Altogether,  the  liberal  and  prosperous  fund  may 
grant  aid  for  14«  weeks  to  the  wage-working 
mother. 

To  underscore  the  importance  of  these  measures 
for  purposes  of  health  conservation,  some  figures  of 
our  mortality  statistics  may  again  be  quoted.  Some 
80,000  children  in  the  United  States  die  annually 
from  diseases  of  early  infancy,  of  which  about  two- 
thirds  die  from  premature  birth,  and  one-third  from 
"  congenital  debility,"  inanition,  debility,  and  maras- 
mus, practically  all  preventable  conditions.7  And  while 
it  would  be  idle  to  claim  that  in  all  or  in  the  majority 
of  the  cases  the  lack  of  mother's  care  is  the  cause,  yet 
recent  investigations  by  the  United  States  Children's 
Bureau  leave  no  doubt  as  to  the  importance  of  its 
lack  as  a  contributing  cause.  Of  course  the  data 
prove  that  undiscriminating  distribution  of  benefits 
alone  will  not  solve  the  question  of  infant  mortality, 
as  the  Webbs  have  so  significantly  pointed  out.  For 
this  reason  assistance  in  kind,  by  medical  aid,  by 

T  The  number  of  deaths  in  the  registration  area  of  the 
United  States  in  1913  from  disease  of  early  infancy  was 
52,865,  which  would  be  equivalent  to  about  52,865-^.651  = 
81,206  for  the  entire  country. 


MATERNITY  BENEFIT  129 

visiting  nursing,  etc.,  is  of  even  greater  importance. 
But  it  is  statistically  established  that  three  months 
of  breast  feeding  have  a  decided  preventive  effect  upon 
the  extent  of  child  mortality. 

Accepting  the  necessity  of  these  provisions,  the 
quertion  of  selection  between  a  separate  maternity- 
insurance  system  and  maternity-insurance  benefits  as 
a  part  of  a  health  insurance  still  remains.  As  was 
shown  above,  European  precedents  are  almost  with- 
out exception  in  favor  of  the  latter  system.  What- 
ever the  difference  of  underlying  economic  principle 
may  be,  the  decisive  point  is  that  the  services  to  be 
rendered — medical  aid,  nursing,  supplies,  weekly 
benefits  for  a  limited  time — are  all  identical  in  both 
systems,  and  the  waste  of  duplicating  the  administra- 
tive machinery  obvious.  Moreover,  unless  a  system 
of  gratuitous  state  subsidies  for  maternity  be  the 
other  alternative,  a  separate  system  would  place  a 
heavy  burden  upon  the  wage-working  women;  while 
the  cost  is  easily  diffused  in  a  general  health-insur- 
ance organization.  Especially  cumbersome  would  be 
the  organization  of  a  separate  system  in  this  country, 
where  the  number  of  married  women  at  work  is 
smaller,  and  motherhood  out  of  wedlock  less  frequent 
than  in  Europe. 

The  practical  conclusion,  therefore,  is :  that  mater- 
nity insurance  should  be  made  an  essential  part  of 
sickness  insurance,  and  that  it  should  include:  (a) 
sufficient  medical  aid,  (6)  at  least  a  2  weeks'  period 
of  rest  before  childbirth,  (c)  from  4»  to  6  weeks'  bene- 


ISO      STANDARDS  OF  HEALTH  INSURANCE 

fit  after  childbirth  for  the  sake  of  the  mother,  (d)  an 
equal  additional  period  for  the  sake  of  the  child. 

Lest  this  be  considered  a  Utopian  program,  it  may 
be  stated  here  that,  notwithstanding  all  the  financial 
pressure  of  the  war,  Germany  by  a  decree  of  Decem- 
ber 3,  1914,  has  voted  2,000,000  marks  a  month  for 
the  purpose  of  providing  for  the  wives  of  men  at  the 
front  the  following  benefits  at  childbirth:  (1)  25 
marks  to  meet  the  cost  of  childbirth;  (2)  1  mark 
per  diem  (including  Sundays  and  holidays)  for  8 
weeks,  of  which  at  least  6  must  be  after  childbirth; 
(3)  10  marks  for  additional  nursing  and  medical 
aid,  if  necessary;  (4)  in  case  of  a  breast-feeding 
mother,  1-2  mark  per  diem  for  12  weeks,  making  a 
total  benefit  period  of  20  weeks,  and  a  total  maximum 
cost  of  133  marks,  or  $31.65. 

In  explanation  of  these  measures  the  decree  states 
that  "  the  enormous  sacrifice  of  human  life  which  war 
demands  make  it  the  imperative  duty  of  the  state  to 
take  proper  care  for  the  preservation  and  strengthen- 
ing of  the  coming  generation  at  the  very  moment  of 
entrance  into  this  world." 

Of  course  it  is  rather  pathetic  that  civilized  Eu- 
rope should  have  had  to  wait  for  a  world  war  to 
realize  the  general  social  value  in  the  preservation 
and  strengthening  of  the  coming  generation.  One 
can  only  hope  that  day  is  coming  and  is  perhaps  not 
so  very  far  off  when  the  child's  life  will  be  worth 
while  even  in  absence  of  any  efforts  at  systematic  an- 
nihilation of  the  human  race. 


MATERNITY  BENEFIT  131 

It  is  impossible  to  close  this  discussion  of  maternity 
insurance  without  referring,  at  least  briefly,  to  the 
strenuous  opposition  that  has  already  developed  to 
any  plan  of  maternity  benefits  or  maternity  insur- 
ance in  this  country.  In  so  far  as  the  objection  to 
maternity  benefits  rests  upon  the  same  foundation  as 
that  to  the  entire  scheme  of  health  insurance,  or  to 
the  whole  program  of  social  insurance  for  that  mat- 
ter, such  as  the  charge  of  paternalism,  the  un-Amer- 
ican character  of  the  principle  of  compulsion,  the 
additional  burden  upon  industry,  and  what  not — no 
special  rebuttal  at  this  place  is  called  for.  But  the 
opposition  to  maternity  benefits  as  such,  especially 
when  it  comes  from  individuals  or  social  groups 
otherwise  always  found  on  the  side  of  protective 
labor  and  social  legislation,  cannot  be  waved  aside 
without  further  consideration. 

Up  to  the  present,  practical  discussion  of  health- 
insurance  plans  centers  about  the  proposals  ad- 
vanced by  the  Social  Insurance  Committee  of  the 
American  Association  of  Labor  Legislation.  The 
tentative  draft  of  an  act  published  by  the  Commit- 
tee in  November,  1915,  and  again  in  December,  1915, 
contains  a  specific  provision  (section  15)  for  mater- 
nity benefits  to  consist  of — 

1.  All    necessary     medical,    surgical,     and     ob- 
stetrical aid,  materials,  and  appliances  which  shall 
be    given    insured    women    and    wives    of    insured 
men. 

2.  A  weekly  maternity  benefit,  payable  to  insured 


132      STANDARDS  OF  HEALTH  INSURANCE 

women,  equal  to  the  regular  sick  benefit  of  the  in- 
sured, for  a  period  of  8  weeks,  of  which  at  least  6 
shall  be  subsequent  to  delivery,  on  condition  that  the 
beneficiary  abstain  from  gainful  employment  during 
the  period  of  payment. 

This  provision  was  eliminated  from  the  Mills  Bill 
introduced  in  the  New  York  legislature  in  January, 
1916,  and  the  identical  bills  introduced  in  the  legis- 
latures of  Massachusetts  and  New  Jersey — all  pre- 
pared by  the  same  committee.  This  action  in  elimi- 
nating maternity  benefits  altogether  was  taken  by 
the  committee  rather  unwillingly  under  pressure  of 
an  opposition  which  suddenly  developed,  with  such 
an  ardent  worker  for  social  legislation  as  Mrs.  Flor- 
ence Kelly  as  chief  spokesman. 

The  main  argument  advanced  is  the  fear  of  the 
maternity  benefit  proving  a  stimulus  or  even  a 
bonus  for  wage-work  of  married  women.  It  is 
argued  that  the  married  women  in  industry  repre- 
sent an  aspect  of  pauperized  European  labor, 
which  is  contrary  to  American  traditions ;  that 
everything  must  be  done  to  resent  the  extension  of  this 
European  tradition  on  American  soil ;  that  only  the 
wives  of  negroes,  non-English-speaking  aliens,  and  de- 
fectives and  delinquents  work  for  wages  in  this  coun- 
try; that  wage-earning  by  wives  of  white  men  is 
a  matter  of  choice,  not  of  family  necessity ;  and  that 
the  maternity  benefits,  especially  the  cash  benefit,  will 
encourage  rather  than  repress  this  undesirable 
tendency. 


MATERNITY  BENEFIT  133 

As  was  forcibly  stated  by  one  opponent :  Offering 
a  cash  bonus  amounts  to  saying  to  the  wage-earning 
husband,  "  Send  your  wife  into  a  mill,  factory,  or 
sweat-  ..hop,  and  the  public  and  the  single  women  in 
her  factory  will  send  you  a  present  for  your  next 
baby." 

The  objection  is  also  raised  that  maternity  insur- 
ance is  a  leap  in  the  dark,  because  it  is  not  based  upon 
specific  knowledge  as  to  the  number  of  married 
women  in  industry  and  their  economic  and  social 
condition. 

It  is  undoubtedly  true  that  the  wage-working  mar- 
ried woman  is  a  rarer  phenomenon  in  the  United 
States  than  in  most  European  countries.  It  is  also 
true  that  our  statistical  information  concerning 
married  women  in  industry  is  badly  out  of  date,  be- 
cause the  13th  census  failed  to  utilize  fully  the  ex- 
tensive data  collected  at  enormous  cost. 

But  it  does  not  follow  that  qualitative  knowledge 
is  necessarily  worthless  because  it  does  not  always 
possess  sufficient  quantitative  accuracy.  The  num- 
ber of  married  women  at  work  increased  from 
515,124.  in  1890  to  775,924  in  1900,  or  over  50  per 
cent.  It  constituted  in  1890  14  per  cent  of  all 
women  at  work,  and  in  1900,  15.5  per  cent.  The 
proportion  of  married  women  at  work  to  the  total 
number  of  married  women  in  1890  was  4.6  per  cent, 
and  in  1900,  5.6  per  cent.  What  reason  is  there  to 
assume  that  this  tendency,  accompanying  as  it  does 
the  industrial  development  of  every  civilized  country, 


134      STANDARDS  OF  HEALTH  INSURANCE 

has  been  interrupted  in  the  United  States  since  1900? 

Surely  the  general  advance  of  women  into  indus- 
trial and  commercial  life  has  not  been  interrupted — 
that  much  we  know.  The  number  of  women  bread- 
winners registered  as  such  by  the  census  enumerators 
has  increased  from  5,007,069  in  1900  to  8,075,772 
in  1910.  The  popular  feminist  and  suffragist  writer 
speaks  with  as  much  right  of  the  demands  of  "  eight 
million  women,"  as  he  (or  rather  she)  did  10  years 
ago  of  the  "  five  million."  It  is  likely  that  this 
increase  has  been  exaggerated  by  change  of  method, 
but  even  after  due  allowance  for  this  the  number  re- 
mains considerably  in  excess  of  seven  millions  (7,- 
216,848), 8  or  an  increase  of  some  44  per  cent  in  10 
years. 

It  is  also  true  that  wage-work  of  married  women 
is  particularly  common  among  the  negro  race.  Yet 
it  is  not  at  all  unknown  among  the  native  born,  as 
is  seen  from  the  following  data : 


MARRIED  FEMALE  BREADWINNERS 


1890 

Per 
cent 

1900 

Per 
cent 

Increase 
percent 

Native  White: 
Parents  native  

135,881 

26.4 

217,515 

280 

60 

Parents  foreign  born  . 
Foreign  born  

36,375 
72  617 

7.1 
14.1 

69,065 
102,416 

8.9 
13.2 

90 
41 

Negro  

269,169 

52.2 

376,114 

48.5 

40 

Others  

1  082 

2 

10764 

1  4 

876 

Total  

515  124 

1000 

775  924 

1000 

51 

•See  "Recent  Trend  of  Real  Wages,"  by  I.  M.   Rubinow, 
American  Economic  Reviev,  Dec.,  1914,  p.  815. 


MATERNITY  BENEFIT  135 

Comparatively,  therefore,  the  predominating 
position  of  the  negro  race  has  considerably  declined 
in  the  group  of  married  women  at  work;  and  the 
native-born  woman  of  native  parentage  is  a  more 
important  factor  numerically  now  than  she  was  10 
years  earlier.  To  be  sure,  this  is  only  a  super- 
ficial analysis.  It  should  be  further  studied  by 
localities  and  occupations;  and  the  absence  of 
corresponding  data  for  1910  is  a  serious  handi- 
cap. But  with  all  that  the  increase  in  the  num- 
ber of  married  women  at  work  is  a  universal  social 
phenomenon  of  no  mean  dimensions. 

It  is  not  necessary  here  to  go  into  an  analysis  of 
the  feminist  argument  demanding  employment  for 
married  women  as  a  means  of  self-expression,  or  the 
argument  of  the  radical  Socialist  woman,  welcoming 
the  married  woman  into  the  rank  of  wage-workers, 
because  she  may  thus  become  a  comrade  in  the  labor 
struggle,  while  the  wage-worker's  wife  at  home  re- 
mains conservative  and  a  drag  upon  the  labor  move- 
ment. It  may  be  readily  admitted  that  in  the  ma- 
jority of  cases  wage-work  of  married  women,  as  the 
wage-work  of  widows,  is  a  phenomenon  in  social 
pathology,  a  result  of  insufficient  wages,  and  much 
less  frequently  results  from  the  desire  to  increase  the 
family  earnings,  to  provide  for  comforts,  luxuries, 
or  savings.  The  significant  fact  remains  that  hun- 
dreds of  thousands  of  married  women  do  work  for 
wages  even  in  this  country  and  that  their  number  is 
rapidly  increasing ;  and  if  wage-work  of  the  married 


136      STANDARDS  OF  HEALTH  INSURANCE 

woman  is  injurious  both  for  her  and  her  children, 
surely  it  is  doubly  injurious  both  for  mother  and 
child  during  the  period  preceding  and  succeeding  the 
act  of  childbirth.  The  purpose  of  maternity  insur- 
ance is  to  prevent  just  this  injurious  effect. 

Is  the  explanation  for  the  woman's  work  always  or 
largely  to  be  found  in  the  delinquency  of  her  hus- 
band? If  the  wives  of  negroes  and  Italians  predomi- 
nate, is  the  main  reason  the  unwillingness  of  the 
Italian  or  negro  man  to  work  for  the  support  of  his 
family?  Such  an  explanation  over-emphasizes  the 
individual  cause  at  the  expense  of  broad  economic 
and  social  factors.  The  disregard  of  the  latter  forces 
one  to  look  for  a  multiplicity  of  specific  causes  in 
various  countries.  For  there  are  no  Italians  and 
negroes  in  Belgium,  Germany,  or  France,  where  wage- 
work  of  married  women  is  common.  The  absence  of 
Jewish  married  women  in  American  industry  is  urged 
as  a  contrast,  but  it  is  forgotten  that  the  Jewish 
worker  is  usually  a  skilled  or  semi-skilled  worker, 
whose  earnings  are  higher  than  those  of  the  un- 
skilled Italian  subway  digger,  or  negro  elevator 
operator. 

Moreover,  the  discussion  on  these  lines  leaves  out 
of  consideration  the  abandoned  wife,  the  wife  of  the 
workman  disabled  by  accident,  acute  illness,  or 
chronic  invalidity,  the  wife  of  the  unemployed  worker, 
who  is  driven  to  work  at  least  temporarily,  the  mother 
of  the  posthumous  child. 

And  finally  the  problem  of  the  unmarried  mother 


MATERNITY  BENEFIT  137 

need  not  be  disregarded.  There  may  be  few  of  them 
in  this  country.  The  higher  standard  of  sexual 
morality  in  American  society  may  be  admitted, 
though  how  far  it  could  affect  the  millions  of  immi- 
grant wage-workers,  men  and  women,  is  problemati- 
cal. The  various  reports  of  vice  investigation 
commissions  in  Chicago,  New  York,  Baltimore,  Phila- 
delphia, and  elsewhere,  somewhat  disturb  our  Amer- 
ican optimism  in  this  respect.  It  is  possible  that  the 
difference  in  illegitimacy  is  as  much  due  to  wider 
knowledge  of  contraceptive  methods  or  greater  fre- 
quency of  abortion.  And  if  the  absence  of  system- 
atized maternity  benefits  is  partly  responsible  for 
it,  by  throwing  the  entire  economic  responsibility 
for  the  change  in  standards  of  sex  morality  upon 
the  woman,  isn't  it  about  time  to  prevent  this 
tendency  from  further  extension? 

There  may  be  no  exact  measurement  for  the  need 
of  maternity  aid.  It  is  possible  to  overdo  the  de- 
mand for  statistics  and  information  as  a  preliminary 
to  action.  Most  valuable  social  statistics,  as  a  mat- 
ter of  fact,  come  as  a  consequence  of  constructive 
social  action.  We  knew  no  more  about  industrial 
accidents  when  compensation  legislation  was  advo- 
cated. 

Statistical  information  concerning  the  extent  of 
need  created  by  motherhood  is  certainly  lacking,  and 
yet  no  experienced  charity  worker  can  fail  to  appre- 
ciate its  existence.  The  writer  was  recently  asked 
by  a  newspaper  reporter  how  and  when  he  first  be- 


138      STANDARDS  OF  HEALTH  INSURANCE 

came  interested  in  social  insurance.  It  was  not  easy 
to  search  through  one's  memory  for  the  first  stimulus 
which  was  responsible  for  13  years  of  continuous 
and  obstinate  agitation  in  favor  of  social  insurance 
before  an  indifferent  public.  But  the  impression 
received  through  a  brief  period  of  medical  practice 
of  the  horrible  circumstances  under  which  some 
women  of  the  wage-working  class  were  forced  to  exer- 
cise their  holy  function  of  motherhood  was  perhaps 
more  than  anything  else  responsible. 

The  situation  created  by  the  elimination  of  the 
maternity  benefits,  as  was  done  in  the  Mills  Bill,  is 
illogical  and  socially  altogether  untenable.  The  in- 
sured working-man  is  sure  of  medical  aid  and  cash 
benefits,  no  matter  what  his  illness.  The  work- 
ing-woman who  pays  perhaps  the  same  dues  when 
totally  disabled  while  exercising  her  important 
social  function  would  be  deprived  of  medical 
aid,  of  supplies,  would  have  to  skimp,  worry, 
and  perhaps  go  without  the  necessaries — all  be- 
cause of  a  theoretical  consideration  that  it  would 
be  better  for  her  not  to  be  a  wage-worker,  and 
for  her  husband  to  earn  enough  for  both.  Surely 
no  one  knows  that  better  than  the  wage-working 
woman  herself.  It  is  significant  that  vigorous 
protests  against  the  elimination  of  the  maternity 
benefits  are  heard  from  the  wage-working  women, 
and  their  representatives. 

In  the  Socialist  press,  Mrs.  Anita  C.  Block,  a  well- 
known  Socialist  writer,  calls  upon  the  "  Socialist 


women  to  take  the  initiative  and  act  without  de- 
lay." 9  At  a  hearing  before  the  Judiciary  Commit- 
tee of  the  New  York  Senate,  at  Albany,  on  March 
14,  1916,  Miss  Pauline  Newmann  energetically  pro- 
tested in  the  name  of  the  International  Ladies'  Gar- 
ment Makers'  Union.  It  would  seem  that  the  wage- 
workers  themselves  often  more  clearly  perceive  the 
inexorable  tendencies  of  the  age  than  even  the  most 
enthusiastic  friends  of  social  legislation. 

•New  York  Call,  Magazine  Section,  Jan.  30,  1916. 


VIII 
FUNERAL  BENEFIT 

THERE  is  no  necessary  logical  connection  between 
sickness  insurance  and  funeral  benefits,  especially 
when  the  term  "  health  insurance  "  is  used,  but  the 
historical  connection  is  very  close.  Compulsory  in- 
surance grew  out  of  voluntary  insurance,  as  prac- 
tised by  mutual-aid  societies,  and  help  in  funerals, 
both  in  kind  and  in  money,  was  the  earliest  form  of 
mutual  aid.  In  many  mutual-aid  societies  funeral 
benefits  are  given,  but  special  funeral-aid  societies  are 
quite  common  in  most  European  countries  and  in  the 
United  States. 

This  is  true  of  Denmark,  where  sick-benefit  so- 
cieties do  not  grant  funeral  benefits.  These  are 
usually  provided  by  formally  independent  burial 
clubs,  but  these  are  connected  with,  and  under  the 
same  management  as,  sick-benefit  societies.  The 
separation  is  largely  the  result  of  the  requirements  of 
the  law.  The  reason  for  such  enforced  separation  is 
found  in  the  possible  actuarial  dangers  of  an  in- 
creasing death-rate  among  those  voluntarily  insured. 
Technically,  funeral  insurance  approaches  life  insur- 
ance (since  payments  depend  upon  the  contingency 
of  death),  and  unless  rates  are  scientifically  built 

140 


FUNERAL  BENEFIT  141 

upon  a  mortality  table,  the  difficulties  of  assessment 
in  life  insurance  may  arise.  The  state  has  established 
a  reinsurance  fund  for  these  burial  clubs,  and  the 
permitted  amount  of  insurance  is  light — 150  kronen 
(about  $40) — while  as  a  matter  of  fact  about  85  per 
cent  of  them  grant  funeral  benefits  of  only  100  kronen 
($27)  or  less.  The  British  health  insurance  makes 
no  provision  at  all  for  funeral  benefits,  for  the  same 
reason  that  may  have  a  decisive  influence  in  this 
country — i.e.,  the  popularity  of  so-called  industrial 
life  insurance,  which  furnishes  little  besides  funeral 
benefits  but  has  succeeded  in  reaching  practically  the 
entire  wage-working  population — and  the  definite  ob- 
jections raised  by  the  British  industrial  life-in- 
surance companies  against  the  inclusion  of  funeral 
benefits.1 

In  Germany,  on  the  other  hand,  funeral  benefits  on 
the  death  of  insured  persons  are  compulsory.  The 
normal  amount  is  small,  20  times  the  basic  daily 
wage,  and  thus  limited  to  100  marks  as  a  maximum. 
Voluntarily,  the  funds  may  increase  it  to  40  times 
the  daily  wage  (maximum  200  marks),  or  establish 
a  minimum  of  50  marks  ($12).  In  addition,  funeral 
benefits  at  the  death  of  members  of  families  are 
optional.  In  case  of  the  death  of  wife  or  husband, 
they  must  not  exceed  two-thirds,  and  in  case  of  chil- 
dren, one-half,  of  the  normal  amount.  Funeral  bene- 
fits of  an  equally  modest  amount  are  also  granted  by 

1  See  New  Statesman,  March  13,  1915,  Special  Supplement, 
p.  30. 


142      STANDARDS  OF  HEALTH  INSURANCE 

all  other  compulsory  sickness-insurance  systems, 
except  that  of  Great  Britain.  What  shall  the  atti- 
tude toward  funeral  benefits  be  in  drafting  American 
health-insurance  acts  ? 

It  may  be  admitted  that  there  is  no  such  urgency 
about  this  form  of  benefit  as  there  undoubtedly  is 
about  the  other  main  branches  of  activity  outlined 
above.  Perhaps  80  per  cent  of  the  wage-workers,  and 
a  goodly  proportion  of  the  members  of  their  families, 
are  already  protected  by  this,  the  least  important, 
form  of  working-men's  insurance.  The  preservation 
of  a  high  standard  of  funerals,  moreover,  does  not 
constitute  the  aim  of  social  insurance.  Besides,  not 
to  mince  matters,  the  effort  to  introduce  funeral 
benefits  into  a  compulsory  sickness-insurance  system 
will  undoubtedly  create  a  very  strong  opposition  from 
industrial  life-insurance  interests  to  the  entire  sys- 
tem proposed.  It  may  be  good  politics,  as  it  was  in 
Great  Britain,  to  yield  without  a  fight — and  keep 
these  benefits  out.  But  do  these  considerations  en- 
tirely settle  the  matter?  It  would  be  out  of  place  in 
this  study  to  go  into  a  detailed  discussion  of  indus- 
trial life  insurance  as  such.2  But  whether  the  high 
cost  of  life  insurance  to  wage-workers  can  be  re- 
duced! through  a  better  system  or  not,  it  is  evidently 
undesirable  that  a  system  which  costs  the  American 
working-men  some  $200,000,000  per  annum  should 

*  The  writer  has  already  done  so  in  his  work  on  Social  In- 
surance, chap,  xxv,  "  Life  Insurance  for  Workmen,"  espe- 
cially pp.  417-21.  See  also  New  Statesman,  March  13,  1915. 


FUNERAL  BENEFIT  143 

result  in  no  larger  gain  than  an  extravagant  funeral. 
Even  if  industrial  life  insurance  should  remain  as  it 
is,  anything  that  would  prevent  the  established  ex- 
travagance in  funerals,  and  preserve  the  benefits  of 
industrial  life  insurance  for  a  purpose  commensurate 
with  its  cost,  would  appear  desirable.  Extravagance 
at  funerals  among  the  poor  has  grown  to  be  a  seri- 
ous economic  problem,  and  as  yet  all  efforts  to  over- 
come it  have  been  unsuccessful.  The  assumption  of 
this  burden  by  the  sickness-benefit  fund  would  estab- 
lish one  fairly  uniform  standard,  the  acceptance  of 
which  would  not  mean  loss  of  social  caste,  and  finally, 
through  democratic  co-operative  effort,  it  could  cut 
down  by  probably  more  than  half  the  altogether  use- 
less waste  from  overcharge  and  extortion  of  under- 
takers and  cemetery-owners. 

Compensation  acts  in  various  states  have  already 
established  a  standard  of  $100  for  funerals.  If  all 
the  burials  among  the  workers  of  a  large  city  were 
handled  by  their  own  organization,  and  in  their  own 
cemetery,  the  cost  could  probably  be  reduced  to 
$50.  And  insurance  for  a  burial  benefit  of  that 
amount,  with  an  average  death-rate  from  16  to  20 
per  1,000,  should  cost  from  80  cents  to  $1  per  capita 
per  annum — about  2  cents  a  week. 

It  is  evidently  highly  desirable  that  the  advantages 
of  co-operative  effort  be  utilized  in  that  direction. 
Only  in  this  way  lies  a  reasonable  hope  that  life 
insurance  for  wage-workers  might  be  forced  into 
legitimate  channels.  That  there  is  an  earnest  need 


144      STANDARDS  OF  HEALTH  INSURANCE 

for  such  life  insurance  goes  without  saying.  Nor 
can  the  high  efficiency  of  large  life  insurance  com- 
panies be  altogether  disregarded.  But  the  social 
objection  to  industrial  life  insurance  as  at  present 
conducted  can  never  be  overcome  until  some  cheaper 
substitute  for  the  present  method  of  soliciting  and 
collecting  can  be  discovered.  The  method  is  a  natural 
consequence  of  insuring  for  very  small  amounts,  only 
sufficient  for  a  funeral — of  insuring  all  the  members 
of  the  family  down  to  the  newborn  child,  and  weekly 
premium  so  low  that  its  collection  by  visitation  be- 
comes an  economic  absurdity.  With  the  funeral 
problem  out  of  the  way,  it  is  doubtful  whether  indus- 
trial life  companies  will  be  able  to  keep  up  their 
prodigious  premium  volume,  unless  some  more  effec- 
tive system  is  substituted.  And  it  is  almost  certain 
that  with  the  ingenuity  characterizing  the  manage- 
ment of  this  business,  some  such  a  system  will  be 
introduced.  Perhaps  the  solution  lies  in  some  form 
of  group  insurance  for  which  the  health-insurance 
organization  will  offer  a  convenient  medium. 


IX 
OPTIONAL  BENEFITS 

THE  four  main  branches  of  effective  service  which  a 
health-insurance  system  should  furnish — medical 
care,  sick  benefits,  maternity  benefits,  funeral  benefits 
— have  been  outlined  in  the  pages  preceding. 
Throughout  the  discussion,  it  is  hoped,  a  spirit  of 
moderation  in  demands  has  been  preserved,  but  the 
main  conditions  stated  which  must  be  created  in 
order  to  realize  the  objects  of  modern  health  insur- 
ance. Though  the  system  is  compulsory,  it  should 
not  be  understood  to  place  any  limits  upon  the  spirit 
of  mutual  aid  and  co-operation  to  which  the  organ- 
ization of  local  health-benefit  funds  should  prove  a 
valuable  stimulus.  As  in  Germany,  so  in  this  coun- 
try, voluntary  extension  of  benefits  may  be  ex- 
pected. All  such  extensions  should  take  place  under 
proper  control,  so  as  not  to  result  in  financial  embar- 
rassment, nor  in  encouragement  of  malingering. 
Perhaps  in  the  early  drafts  of  the  laws,  which  must 
deal  with  the  difficulties  of  organization,  the  inclusion 
of  detailed  provisions  for  such  optional  benefits  is  not 
particularly  important.  In  fact,  the  objection  may 
be  raised  that  they  would  give  (as  do  the  additional 

145 


146      STANDARDS  OF  HEALTH  INSURANCE 

benefits  in  the  British  National  Health  act)  an  ap- 
pearance that  some  very  desirable  things  are  being 
accomplished,  when  as  a  matter  of  fact  for  some 
years  to  come  all  these  additional  benefits  may  re- 
main dead  letters.  With  the  comparative  ease  of 
legislation  in  this  country,  it  may  be  sufficient  to  pro- 
vide for  the  immediate  future. 

Nevertheless  a  brief  discussion  of  such  optional 
benefits  at  this  place  may  be  useful  for  several  rea- 
sons: 

1.  The  list  of  optional  benefits  permitted  clearly 
indicates  how  much  necessarily  remains  undone  even 
after  the  minimum  requirements  have  been  complied 
with.     Presumably  no  law  would  include  in  its  list 
of  optional  benefits   such  services   as   are  evidently 
unnecessary.     The  insurance  system  should  not  fur- 
nish any  luxuries  entirely  beyond  the  normal  wage- 
worker's  standard  of  living  unless  the  conditions  of 
illness  makes  necessaries  of  such  luxuries.    The  dan- 
gers of  over-insurance  are  evident,  especially  when 
dealing  with  a  condition  as  easily  simulated  as  sick- 
ness, nor  is  there  any  reason  why  public  funds,  which 
may  be  needed  at  some  other  time  for  necessaries, 
should  be  thus  uselessly  dissipated. 

2.  Most  optional  benefits  have  to  some  extent  been 
realized  at  least  in  Germany.     The  actual  achieve- 
ments  of  the  health-insurance   system  in  Germany, 
and  its  possibilities  in  this  country,  cannot  fully  be 
realized  without  a  study  of  these  optional  benefits. 


OPTIONAL  BENEFITS  147 

3.  The  introduction  of  optional  benefits  depends 
largely  upon  the  system  of  organization  of  the  health 
insurance.     It  will  thrive  best  under  conditions  of 
reasonable   local  autonomy,   a   healthy   co-operative 
spirit,  and    democratic    administration.     It    offers, 
therefore,  an  additional  weighty  argument  for  the 
particular     system     outlined     in      a      subsequent 
chapter. 

4.  After  the  effective  realization  of  the  minimum 
standards,  further  extension  of  the  system  may  be 
expected  through  gradual  inclusion  of  optional  bene- 
fits among  compulsory  requirements.     A  list  of  com- 
prehensive optional  requirements,  therefore,  outlines 
the  lines  of  later  growth  while  offering  meanwhile 
numerous  experimental  laboratories  for  testing  out 
the    comparative  value   and   popularity   of  various 
services. 

It  will  be  sufficient  to  study  the  optional  benefits 
under  two  acts,  the  British  and  the  German. 

The  optional  or  additional  benefits  of  the  British 
acts  are  14  in  number,  and  may  be  classified  into  four 
groups : a 

1.  Increase  of  compulsory  benefits. 

(a)  Increase  of  the  sickness  benefit  for  all  mem- 

bers,  or    only    some,   depending   upon    the 
number  of  dependent  children. 

(b)  Reduction    or    entire    abolition    of    the    three 

days'  waiting  period. 

(c)  Increase  of  maternity  benefit. 

1  Section  8  (1),  Fourth  Schedule,  Part  VI. 


148      STANDARDS  OF  HEALTH  INSURANCE 

2.  New  benefits. 

(a)  Payment  of  part  or  whole  of  cost  of  dental 

treatment. 

(b)  Invalidity   benefit   to   members   only  partially 

disabled. 

(c)  Allowance  during  convalescence. 

(d)  Old-age  pensions  in  addition  to  those  under  act 

of  1908,  or  otherwise. 

(e)  Payment    of    contributions    to    superannuation 

funds  for  benefit  of  members. 

(f)  Payments  to  members  in  want. 

(g)  Small  money  benefits  to  members  in  hospitals, 
(h)  Payments  to  members  not  allowed  to  work  on 

account  of  infection, 
(i)   Refunding  of  contributions. 

3.  Extension  of  benefits  to  dependents: 

Medical  treatment  and  attendance  for  dependents. 

4.  Extension  of  activities. 

The  building  or  leasing  of  premises  suitable  for  con- 
valescent homes,  and  the  maintenance  of  such 
homes. 

In  the  German  act  the  optional  benefits  are  scat- 
tered through  many  paragraphs,  in  which  the  mini- 
mum benefits  are  outlined.  Altogether  some  twenty 
such  specific  extensions  may  be  enumerated,  which 
for  comparative  purposes  may  be  grouped  into  the 
same  subdivisions: 

1.  Increase  of  compulsory  benefits. 

(a)  Increase  of  sick  benefits  up  to  75  per  cent  of 
wages. 


OPTIONAL  BENEFITS  149 

(b)  Grant  for  Sundays  and  holidays. 

(c)  Sick  benefits  extended  to  52  weeks. 

(d)  Waiting   period   reduced   or   abolished   in   all 

cases,  or   only  in  cases   of  industrial   acci- 
dents, or  in  cases  lasting  over  one  week. 

(e)  Increased  benefit  payable  to  family  when  in- 

sured receives  hospital  treatment — from  one- 
half  to  the  full  amount  of  the  sick  benefit. 

(f)  Increased  funeral  benefit,  up  to  40  times  the 

daily  wage. 

(g)  Minimum    for    funeral    benefits    increased    to 

50  marks  ($11.90). 

2.  New  benefits. 

(a)  Hospital  treatment. 

(b)  Nurses'  attendance. 

(c)  Appliances    to    prevent    disfigurement    or    de- 

formity. 

(d)  Grant  of  special  diets. 

(e)  Grant  of  other  therapeutic  means. 

(f)  Sick  benefits  (up  to  one-half  of  the  regular  sick 

benefit)  to  insured  persons  under  treatment 
in  hospitals. 

(g)  Pregnancy  benefits  up  to  6  weeks. 

(h)  Medical  treatment  for  ailments  due  to  preg- 
nancy. 

(i)  Nursing  benefits  (or  motherhood  benefits)  up  to 
12  weeks  after  confinement. 

(j)  Convalescent  care  up  to  one  year  after  illness. 

3.  Extension  of  benefits  to  dependents. 

(a)  Medical  treatment  to  dependent  family. 

(b)  Maternity  benefit  to  wife  of  insured. 

(c)  Funeral  benefits  for  death  of  consort  or  child. 


150      STANDARDS  OF  HEALTH  INSURANCE 

The  influence  of  the  German  list  upon  that  con- 
tained in  the  British  act  is  thus  obvious.  In  prac- 
tical effects  they  differ  materially,  because  of  the  dif- 
ference in  financial  organization  of  the  two  systems. 
Under  the  British  act,  the  income  is  fixed,  as  ex- 
plained in  a  subsequent  chapter,  while  the  outgo  is 
often  a  matter  of  conjecture.  The  list  of  additional 
benefits  simply  means :  "  These  are  the  things  that 
roay  be  granted,  if  any  resources  remain  after  the 
compulsory  benefits  have  been  complied  with."  Since 
the  actuarial  complications  of  the  British  system  are 
such  that  it  would  be  difficult  to  prove  the  existence 
of  a  surplus,  and  since  as  a  matter  of  fact,  in  a 
great  many  insurance  organizations  the  expenditures 
appear  higher  'than  was  expected,  the  additional 
benefits  appear  a  dead  letter. 

The  optional  benefits  in  Germany  bear  an  entirely 
different  character.  They  are  functions  which  a 
democratic  co-operative  organization  may  assume  if 
it  is  willing  to  bear  the  additional  cost;  and  though 
this  means  an  additional  burden  upon  the  employer  as 
well  as  the  beneficiary  numerous  sick-insurance  funds 
have  assumed  many  of  such  functions.  As  a  brilliant 
example  of  such  voluntary  extension  the  famous 
Leipzig  fund  may  again  be  referred  to.  It  grants 
hospital  treatment,  nurses'  attendance,  special  appli- 
ances, special  diets,  special  methods  of  treatment, 
such  as  baths  and  massage,  extension  of  sick  bene- 
fits from  26  to  34  weeks,  pregnancy  benefits,  care  of 
convalescents  in  special  institutions,  medical,  hos- 


OPTIONAL  BENEFITS  151 

pital,  obstetrical,  and  funeral  benefits  to  members  of 
family — i.e.,  almost  all  the  optional  benefits  per- 
mitted by  the  law. 

It  will  be  observed  that  several  of  the  so-called 
"  optional "  benefits  of  the  German  act  are  of  such 
importance  to  the  entire  scheme  of  health  insurance 
that  they  have  here  been  included  with  the  necessary 
minimum  requirements.  If  the  reduction  of  these 
standards  should  become  necessary  anything  omitted 
from  the  required  benefits  should  at  least  be  re- 
established in  the  list  of  optional  benefits.  Even  out- 
side of  that,  several  lines  of  desirable  extension  may 
be  indicated: 

1.  Increase  of  various  money  benefits 

(a)  in  time, 

(b)  in  weekly  amounts. 

2.  Further  extension  of  care  of  injured  and  sick  in 

(a)  convalescent  homes, 

(b)  in  special  institutions  for  application  of  ex- 
pensive  methods   of  cure   and   re-establishment  of 
earning  capacity. 

S.  Extension  of  care  and,  possibly,  small  sick  benefits  to 
dependents,  and,  finally, 

4.  While  it  is  undesirable  to  introduce  extraneous  func- 
tions into  these  specialized  "  health-insurance  car- 
riers," an  extension  of  educational  activities  in  mat- 
ters of  personal,  public,  and  industrial  hygiene,  and 
establishment  of  institutions  for  prevention  of  ill- 
ness, such  as  baths,  gymnasia,  would  be  desir- 
able. 


152      STANDARDS  OF  HEALTH  INSURANCE 

When  the  question  of  organization  is  discussed 
it  will  appear  what  an  important  function  in  the 
general  movement  for  preservation  of  life  and  health 
these  new  insurance-carriers  may  be  made  to  fulfil. 


X 
BEARING  THE  COST 

IN  the  preceding  chapters  all  the  necessary  benefits 
of  a  comprehensive  health-insurance  system  were  dis- 
cussed in  some  detail.  Since  insurance  in  the  final 
analysis  is  but  a  mechanism  of  distribution,  and  not 
of  itself  productive,  the  income  side  of  the  ledger 
must  at  least  balance  with  the  expenditures.  Yet 
nothing  at  all  was  said  of  the  source  of  revenues  out 
of  which  all  these  benefits  were  to  be  paid,  and  the 
services  rendered.  The  plan,  as  developed  until  now, 
may  invite  the  criticism  that  it  is  thoroughly  utopian. 
Granted  that  all  the  benefits  and  services  are  desir- 
able, so  are  a  great  many  things.  But  are  they  also 
possible?  Can  the  beneficiaries  pay  for  all? 

The  technical  defense  to  this  criticism  can  easily 
be  made.  In  all  computations  of  insurance  rates,  the 
value  of  the  benefits  must  be  first  ascertained.  The 
computation  for  life-insurance  premiums  proceeds 
upon  the  assumption  of  a  definite  amount  of  insurance 
and  the  present  value  of  this  insurance  payable  at 
some  unknown  distant  date,  with  due  consideration  to 
the  effects  of  compound  interest  and  mortality. 

In  computing  insurance  rates  for  workmen's  com- 
pensation each  particular  act,  with  its  various  bene- 

153 


154      STANDARDS  OF  HEALTH  INSURANCE 

fits,  must  be  separately  valued.  It  was,  therefore,  the 
logical  procedure  first  to  agree  as  to  necessary  bene- 
fits, before  the  discussion  should  turn  to  the  ques- 
tion of  cost.  Nothing  was  included  in  those  benefits 
which  did  not  appear  absolutely  necessary  for  the 
health  and  efficiency  of  the  present  and  future  genera- 
tions of  wage-workers. 

Nevertheless  it  must  be  admitted  that  the  list  of 
included  benefits  is  comprehensive,  and  without  mak- 
ing at  this  time  any  definite  statements  as  to  the  prob- 
able cost,  it  appears  more  than  likely  that,  taking 
these  benefits  together,  it  is  higher  than  the  wage- 
workers  as  a  class  can  pay  for.  That  supposition  is 
strengthened  by  the  fact  that  only  a  small  propor- 
tion of  the  wage-workers  have  voluntarily  provided 
themselves  and  their  families  with  health  insurance, 
and  that  those  who  have  organized  into  mutual  asso- 
ciations for  that  purpose  seldom  receive  more  than 
a  small  part  of  all  the  benefits  included  as  necessary 
here.  The  difficulty  can  be  met  in  one  way  only:  a 
considerable  part  of  the  cost  must  be  shifted  upon 
some  other  social  group.  Compulsory  health  insur- 
ance to  be  successful  must  be  subsidized.  If  this  term 
is  objectionable,  we  may  say  that,  in  view  of  the  so- 
cial importance  of  health  insurance,  society  must  be 
required  to  contribute  to  its  cost. 

In  the  matter  of  distribution  of  the  cost  there  are 
found  perhaps  the  most  important  differences  between 
the  various  types  of  insurance  here  studied.  Under 
the  purely  voluntary  system  almost  the  entire  cost 


BEARING  THE  COST  155 

falls  upon  the  insured  workmen  themselves.  The 
word  "  almost "  is  used  advisedly.  Establishment 
funds  (frequently  known  as  aid  or  benefit  societies) 
are  a  common  form  of  voluntary  health  insurance. 
Few  of  them  exist  without  any  contributions  from  the 
employer,  whether  regulated  by  the  very  constitution 
of  the  funds,  or  in.  form  of  voluntary,  charitable 
gifts.  In  those  countries  where  voluntary  insurance 
through  mutual-aid  societies  has  achieved  a  substan- 
tial degree  of  development  (as,  for  instance,  in 
France  or  Italy),  honorary  membership  (limited  to 
contributions  without  right  to  benefits)  serves  the 
same  purpose.  In  France,  there  are  nearly  500,000 
honorary  members  in  addition  to  the  3,000,000  par- 
ticipating members  of  approved  mutual-aid  societies, 
and  the  contributions  of  the  honorary  members  con- 
stitute about  12  per  cent  of  the  total  income. 

Subsidized  voluntary  insurance  introduces  the  ele- 
ment of  a  governmental  subsidy,  whether  from  the 
central  or  local  government.  In  Denmark  the  state 
contributes  one-fifth  of  the  total  annual  dues,  and  in 
addition  a  per  capita  subsidy  of  2  kronen  (53.6 
cents)  per  member.  As  shown  by  the  statistical 
data,  these  two  grants  together  amount  to  about  one- 
third  of  the  total  revenue  of  the  sickness-insurance 
funds.  The  narrow  limits  of  the  benefits  granted  by 
the  Danish  system  seem  to  indicate  that  a  higher 
subsidy  might  improve  the  social  results  materially. 

All  compulsory  health-insurance  systems  (with  the 
exception  of  those  of  Roumania  and  Holland)  carry, 


156      STANDARDS  OF  HEALTH  INSURANCE 

together  with  the  compulsion  of  the  employees 
to  insure,  also  the  compulsion  of  the  employers 
to  contribute  to  the  cost,  though  the  amount  of  the 
employers'  contribution  is  subject  to  variation.  In 
Germany  the  employer  contributes  a  sum  equal  to 
one-half  of  the  employee's  contribution,  or  one- 
third  of  the  total.  The  same  is  true  of  Austria, 
Russia,  and  some  other  countries.  In  the  insurance 
systems  of  Hungary  and  Servia,  employer  and  em- 
ployee contribute  equal  amounts. 

One  of  the  important  deviations  of  the  British 
system  from  the  German  is  the  compulsory  contribu- 
tion from  the  public  treasury,  in  addition  to  that  of 
the  employer.  This  is  sometimes  referred  to  as  a  dis- 
tinctive feature  added  by  Great  Britain  to  the  theory 
and  practise  of  social  insurance,  but  the  claim  is 
erroneous,  not  only  because  of  the  time-honored 
precedent  of  a  state  contribution  in  the  voluntary 
system  of  Denmark,  but  also  because  of  the  inclu- 
sion of  contributions  both  from  the  state  and  from 
the  communal  treasury  in  Norway's  compulsory  sick- 
ness-insurance law  of  1909.  (The  proportions  in 
Norway  are:  insured,  60  per  cent;  employer,  10; 
commune,  10;  state,  20.) 

The  respective  shareg  in  the  British  law  are  so 
well  known  that  it  seems  scarcely  necessary  to  quote 
them:  the  insured  pays  4>d.  (females,  3d.)  per  week, 
the  employer  &d.,  and  the  state,  in  a  somewhat  in- 
direct way,  2d.  In  proportion  to  one  another,  the 
respective  shares,  in  case  of  the  male  insured,  are: 


BEARING  THE  COST  157 

employee,  44.5  per  cent;  employer,  33.3  per  cent; 
the  state,  22.2  per  cent ;  in  case  of  the  female  insured 
the  proportions  are  37.5  per  cent,  37.5  per  cent,  and 
25  per  cent.  There  are  numerous  modifying  condi- 
tions, some  of  which  will  be  referred  to  presently. 

The  propriety  of  substantial  contributions  from 
both  the  employer  and  the  state  is,  therefore,  sup- 
ported by  the  whole  history  of  the  European  experi- 
ence. This  results  from  the  very  philosophy  of  the 
social-insurance  movement.  But  it  is  quite  certain 
that  the  effort  to  establish  in  this  country  either  sort 
of  contribution  will  call  forth  a  variety  of  objec- 
tions and  protests:  from  the  employers,  who  must 
resent  the  specific  tax  upon  their  industry,  and  from 
the  taxpayers  at  large,  who  regard  it  as  a  new  and 
uncalled-for  burden.  In  the  struggle  for  the  intro- 
duction of  health  insurance  the  demand  for  such  con- 
tributions must  be  based  upon  specific  arguments. 

EMPLOYEE'S  CONTRIBUTION 

Why  should  the  employers  contribute?  We  may 
give  a  sevenfold  answer  to  that  question. 

1.  The   employer's    contribution   is   but  a   fiscal 
method  of  charging  the  industry  (in  the  final  inci- 
dence partly  the  product  and  partly  profits)  with  a 
part  of  the  cost  of  insurance.     Such  charge  is  just, 
largely  because  it  is  needed  in  order  to  keep  the  bene- 
fits up  to  the  necessary  standards. 

2.  It  is  just,  because  the  industry  is  responsible 


158      STANDARDS  OF  HEALTH  INSURANCE 

for  a  large  share  of  the  illness  existing  among  the 
wage-workers.  In  a  great  many  branches  of  indus- 
try partial  responsibility  for  the  disease  is  quite 
obvious.  Even  outside  of  such  clear  cases,  the 
marked  fluctuation  of  the  sickness  rate  in  dependence 
upon  the  industry  is  a  strong  indication  of  such 
causal  connection.  Since  the  justice  of  this  argu- 
ment is  admitted  in  application  to  industrial  acci- 
dents, it  cannot  logically  be  denied,  at  least  within 
certain  limits,  in  the  case  of  illness. 

3.  The  employer's  contribution  may  be  defended 
from  the  point  of  view  of  the  probable,  or  even  almost 
certain,  reaction  upon  the  employer's  profits,  be- 
cause of  the  obvious  material  gain  to  industry  from 
improvement  of  health  conditions  which  must  result 
from  an  efficient  system  of  health  insurance. 

4.  In  most  European  countries  a  further  justifi- 
cation may  be  found  in  the  fact  that  the  burden  of 
care   of   industrial   accidents    for   a   certain   limited 
period  (e.g.,  4>  weeks  in  Austria,  10  in  Hungary,  13 
in  Germany)   is  assumed  by  the  sickness-insurance 
system.     This  argument  must  be  used  with  caution 
because  at  best  it  explains  only  a  smaller  part  of  the 
employer's  contribution.     In  Germany,  for  instance, 
only  from  8  to  10  per  cent  of  the  expenditures  of  the 
sickness  funds  is  required  to  meet  this  cost,  while 
the   employer's   contribution  equals   33.3   per  cent. 
The   proportion  must  be   still   smaller   in   Austria, 
where  care  is  given  by  the  sickness  funds  to  cases 
of  accidents  for  4  weeks  only,  and  in  Hungary,  where 


BEARING  THE  COST  159 

the  employer's  contribution  is  50  per  cent,  and  acci- 
dents are  taken  care  of  for  10  weeks. 

5.  The  employer's  contribution  may  be  justified 
as  a  modification  of  the  minimum-wage  principle.    In 
calculations  of  the  required  minimum  wage,  some  al- 
lowance must  be  (and  usually  is)  made  for  expenses 
connected  with  an  average  amount  of  illness.     Evi- 
dently such  provision  can  be  much  more  efficiently 
made  through  the  mechanism  of  compulsory  insur- 
ance.    It  is  true  that  as  yet  minimum-wage  legisla- 
tion in  this  country  applies  to  women  and  children 
only,  but  whatever  the  constitutional  difficulties,  the 
principle  is  equally  applicable   to  underpaid   adult 
male  workers  as  well.     Wage-workers  with  an  earn- 
ing capacity  considerably  above  the  minimum  natu- 
rally do  not  claim  the  protection  of  the  minimum- 
wage  legislation.     This  raises  an  interesting  problem 
which  will  be  discussed  presently. 

6.  The  compensation  movement  which  has  swept 
the  country  offers  an  additional  argument  for  such 
a  contribution.     It  was  argued  from  the  very  begin- 
ning that  by  placing  upon  industry  a  direct  financial 
responsibility  for  the  occurrence  of  industrial  acci- 
dents,   a    strong    factor    for    prevention    would    be 
created.    Though  the  history  of  compensation  in  this 
country  is  brief,  the  expectation  has  been  fully  real- 
ized.    The  "  Safety  First "  movement  is  largely  due 
to  agitation  in  favor  of  compensation;  progressive 
private  employers  vie  with  insurance-carriers  of  all 
types  in  developing  the  work  of  accident  prevention. 


160      STANDARDS  OF  HEALTH  INSURANCE 

As  to  the  results  of  this  work  statistical  evidence 
is  as  yet  lacking.  But  to  doubt  that  such 
results  must  manifest  themselves  sooner  or  later 
would  be  to  admit  that  the  alarming  accident  fre- 
quency of  this  country  is  inevitable  and  incurable — 
a  conclusion  no  safety  engineer  would  for  a  moment 
countenance. 

7.  Finally,  the  compulsory  contribution  is  only  an 
extension,  over  all  employers,  of  an  obligation  which 
an  increasing  proportion  of  the  progressive  employ- 
ers are  recognizing  voluntarily.  Without  such  com- 
pulsion society  places  a  constant  premium  upon 
failure  to  provide  for  the  health  and  safety  of  the 
employees.  The  movement  which  has  developed  under 
the  flag  of  consumers'  leagues  stands  as  a  recogni- 
tion of  the  necessity  of  compulsion — which  it  en- 
deavors to  apply  by  means  of  "  direct  action  "  as 
opposed  to  the  "  political  action  "  of  a  health-insur- 
ance law. 

STATE    CONTRIBUTION 

The  arguments  in  favor  of  a  substantial  contribu- 
tion from  public  sources  (whether  the  entire  state  or 
the  individual  community)  are  even  stronger. 

1.  The  responsibility  of  the  organized  state  for 
a  considerable  share  of  preventable  sickness  through 
failure  to  enforce  or  provide  satisfactory  conditions 
of  public  hygiene  is  even  clearer  than  that  of  any 
industry,  because  of  the  potential  control  over  gen- 


BEARING  THE  COST  161 

eral  sanitation,  housing,  industrial  activity,  and  edu- 
cation. 

2.  Society  has  a  direct  interest  and  concern  in 
improving  the  health  conditions  of  the  wage-worker 
and  in  assisting  him  to  resist  the  attacks  of  illness, 
because  the  health  conditions  of  all  classes  of  the 
population  must  improve  or  deteriorate  together. 
The  justice  of  the  state  contributing  to  the  care  and 
support  of  the  sick  through  hospitals,  sanatoria, 
medical  inspection,  visiting-nurse  service,  etc.,  is  so 
well  recognized  that  it  does  not  seem  necessary  to 
press  this  argument  further.  But  these  services  are 
open  to  all  classes  of  the  population,  while  compul- 
sory health  insurance  as  here  outlined  may  seem  to 
create  a  special  class  favoritism.  The  answer  to 
this  objection,  however,  is  that  while,  theoretically, 
hospital  service,  etc.,  is  intended  for  the  entire  popu- 
lation, in  actual  practice  it  is  utilized  largely  by  the 
same  groups  which  would  be  brought  under  compul- 
sory insurance,  and  that  insurance  contemplates  the 
payment  for  these  services  out  of  the  fund,  whereas 
heretofore  they  were  furnished  gratis.  The  state's 
contribution  to  the  cost  of  health  insurance  is,  there- 
fore, a  more  effective  way  of  performing  a  service, 
the  necessity  for  which  has  already  been  recognized. 

WORKMAN'S  CONTRIBUTION 

Having  justified  the  contribution  of  the  employer 
and  the  state,  there  still  remains  the  question :  Should 


162      STANDARDS  OF  HEALTH  INSURANCE 

the  workman  contribute?  ,The  question  would  seem 
to  be  quite  preposterous.  As  we  are  dealing  with  an 
insurance  system,  the  payment  of  the  premium  by  the 
insured  would  seem  to  require  no  justification. 
Nevertheless,  it  is  worth  while  to  point  out  that  the 
platform  of  the  Socialist  party  (with  a  membership 
of  some  100,000  and  a  voting  strength  of  nearly  a 
million  and  with  many  more  sympathizers)  demands 
a  system  of  health  insurance,  as  well  as  all  other 
forms  of  social  insurance,  without  any  contribution 
from  the  workman.  Similar  demands  were  often 
made  by  many  radical  labor  organizations  in  Europe. 
As  moderate  a  pair  of  reformers  as  the  Webbs  have 
severely  criticised  the  British  national  insurance 
system  because  it  introduced  a  complex  and 
cumbersome  system  of  special  taxation  of  the 
working-men  for  the  purpose  of  accomplishing 
something  which  could  be  more  easily  done  by  general 
taxation. 

After  all,  precedents  in  support  of  this  view  are 
not  altogether  lacking.  It  is  sometimes  forgotten 
that  one  very  important  precedent  is  furnished  by  the 
entire  practice  of  compensation,  and  analogies  can 
easily  be  found.  The  whole  cost  of  compensation  is 
by  common  consent  levied  upon  industry.  The  charge 
is  accepted  because  industry  is  responsible  for  the 
majority  of  industrial  accidents;  but  this  is  true, 
though  not  to  the  same  extent,  of  a  good  deal  of 
sickness  among  wage-workers.  Of  course,  through 
his  own  actions  entirely  outside  of  the  conditions  of 


BEARING  THE  COST  163 

his  employment,  the  wage-worker  may  bring  illness 
upon  himself.  But  even  so,  no  one  can  deny  that  a 
great  many  industrial  accidents  may  be  traced  to  the 
carelessness  of  the  employee.  The  difference  is  after 
all  one  of  degree  only. 

Another  important  precedent  is  the  system  of  non- 
contributory  old-age  pensions,  accepted  by  a  fairly 
large  number  of  countries  (Denmark,  Great  Britain, 
France,  Australia,  New  Zealand) ,  which  entirely  dis- 
regards the  factor  of  causation  and  proceeds  from 
consideration  of  need  only.  The  same  is  true  of  the 
system  of  mothers'  pensions  which  has  developed  re- 
cently in  this  country  and  to  some  extent  in  Europe. 
At  least  one  country  (France)  has  established  a  sys- 
tem of  non-contributory  maternity  insurance.  It 
cannot  be  argued,  therefore,  that  a  demand  for  health 
insurance  without  contributions  from  the  insured  is 
altogether  chimerical,  impractical,  revolutionary,  and 
what  not. 

There  are,  however,  it  seems  to  the  writer,  be- 
sides the  certain  refusal  of  the  modern  employer  and 
modern  state  to  agree  to  the  cost  of  it,  some  sound 
considerations  for  discarding  this  plan  which,  for  the 
present,  remove  it  from  the  domain  of  practical 
politics. 

Health  insurance  deals  with  temporary  disabilities 
of  otherwise  economically  self-supporting  individuals. 
The  cost  of  illness  constitutes  a  part  of  the  necessary 
"  standards  of  life "  which  should  influence  the 
amount  of  wages.  It  is  not  at  all  necessary  to  place 


164      STANDARDS  OF  HEALTH  INSURANCE 

its  entire  cost  upon  general  taxation  which  may  again 
be  shifted  upon  the  wage-worker.  A  non-contribu- 
tory system  of  sickness  benefits  approaching  outdoor 
poor  relief,  as  do  old-age  and  mothers'  pensions,  must 
establish  a  dead  level  of  minimum  benefits  and  does 
not  permit  of  such  extension  and  adjustment  as  a 
system  of  insurance  can.  Finally,  the  contribution 
of  the  wage-workers  entitles  them  to  a  degree  of  demo- 
cratic participation  in  the  administration  of  the 
funds,  such  as  would  be  quite  impossible  under  a 
system  of  gratuitous  pensions.  The  working  class 
has  amply  demonstrated  its  ability  and  willingness  to 
develop  mutual  insurance.  A  system  of  pensions 
which  would  destroy  these  expressions  of  mutual  aid 
would  be  very  much  less  desirable  than  a  financial 
subsidy  of  such  mutual  insurance  and  its  compulsory 
extension  to  wider  circles.  There  are  sound  social 
reasons,  therefore,  in  favor  of  contributory  insur- 
ance entirely  irrespective  of  the  objections  which 
employing  or  taxpaying  capital  might  raise  against 
carrying  the  entire  burden. 

Moreover,  it  is  possible  to  exaggerate  the  weight 
of  the  burden  which  such  a  partial  contribution  to  the 
cost  of  insurance  would  represent.  It  is  to  be  re- 
gretted that  even  as  profound  a  student  of  labor 
problems  as  Mr.  Sidney  Webb  has  swerved  in  this 
direction.  While  his  earlier  opposition  to  the  entire 
scheme  of  compulsory  insurance  *  has  been  consider- 
ably modified  by  the  study  of  the  results  during  the 

1  See  Prevention  of  Destitution,  by  S.  and  B.  Webb,  chap.  i. 


BEARING  THE  COST  165 

first  two  years,  nevertheless  even  in  the  Fabian  Re- 
port 2  criticism  of  the  "  taxation  of  the  poorest  " 
may  be  found.  But  is  it  at  allscientific  to  consider 
the  contribution  entirely  in  the  nature  of  an  addi- 
tional charge,  forgetting  the  returns  not  only  in 
medical  aid,  but  also  in  sick  benefits,  which  must  in 
the  natural  course  of  events  come  to  every 
insured?  For  if  the  levying  of  that  small  charge 
is  a  substantial  hardship,  how  much  worse  must 
the  total  absence  of  the  pay  envelope  neces- 
sarily be? 

In  fact,  the  assurance  of  necessary  medical  care 
and  of  a  substantial  income  during  illness  is  a  matter 
of  such  great  importance,  that  in  comparison  the 
question  of  distribution  of  the  cost  becomes  a  some- 
what minor  one,  so  long  as  there  is  no  extravagant 
waste  involved.  Where  objections  are  raised  by  em- 
ployees against  any  contributions  because  their 
wages  will  not  permit  the  charge,  by  the  employers 
that  it  is  an  excessive  burden  upon  industry,  by  tax- 
payers against  additional  burden  upon  the  public 
treasury,  because  it  must  result  in  higher  taxes — it  is 
tacitly  assumed  that  a  tax  must  necessarily  remain 
where  originally  placed.  The  tendency  to  shifting 
the  incidence  of  taxation  is  entirely  disregarded. 
Equally  crude  errors  are  often  made  at  the  other  ex- 
treme, and  many  an  economic  writer  has  compla- 
cently asserted  that  the  entire  cost  of  compensation 
and  other  forms  of  social  insurance  is  finally  shifted 

*New  Statesman,  Special  Supplement,  March  4,  1914. 


166      STANDARDS  OF  HEALTH  INSURANCE 

to  the  price  of  the  product,  and  thus  paid  for  by  the 
consumer. 

The  problems  of  shifting  of  compulsory  charges 
are  undoubtedly  complex.3  The  working-man  will  try 
to  shift  his  charge  upon  the  employer  by  demanding 
an  increase  of  wages.  The  employer  may  endeavor 
to  shift  his  contribution  either  back  upon  the  wage- 
worker  through  reduction  of  wages,  or  upon  the 
consumer  through  increase  in  prices  of  the  product, 
or  both ;  the  state  must  necessarily  raise  the  amount 
from  somewhere,  but  which  class  will  be  affected 
thereby  depends  upon  the  exact  character  of  the  tax, 
whether  it  be  direct  on  property  and  incomes,  or  in- 
direct, upon  some  articles  of  consumption. 

So  many  different  possibilities  present  themselves 
that  a  dogmatic  answer  is  difficult.  But  it  is  obvi- 
ously improper  to  assume  as  is  done  by  some  that 
the  entire  burden  will  fall  back  upon  the  wage-worker, 
partly  through  his  own  contribution,  partly  through 
increase  in  prices,  partly  through  taxation.  The 
wage-worker  is  not  the  only  consumer,  he  is  not  (or 
at  least  ought  not  under  any  sane  system  of  taxation 
to  be)  even  the  main  taxpayer,  and  the  strong  influ- 
ence of  a  customary  standard  of  living  upon  wages  is 
so  well-recognized  that  at  least  some  shifting  of  the 
worker's  contribution  upon  the  industry  may  be  ex- 
pected. It  is  reasonable  to  expect  that  at  least  partly 

*  See  the  author's  "  Labor  Insurance,"  Journal  of  Political 
Economy,  June,  1904,  pp.  366-67.  Also  his  "  Social  Insurance," 
pp.  491-92. 


BEARING  THE  COST  167 

the  cost  of  health  insurance  will  come  out  of  profits 
and  rents.  Be  it  as  it  may,  the  shifting  of  the  bur- 
den from  the  shoulders  of  the  sick  and  disabled  upon 
those  of  the  healthy  and  earning  is  the  essential 
thing  to  be  accomplished. 


XI 
DISTRIBUTION  OF  COST 

THE  necessity  of  dividing  the  cost  of  health  insur- 
ance among  the  insured  workman,  his  employer,  and 
the  state  (or  society  at  large)  may  be  set  down  as 
"  a  standard,"  or  a  rule  of  action  supported  by  cer- 
tain definite  considerations.  It  is  somewhat  more 
difficult  to  be  dogmatic  concerning  the  exact  ratio  of 
division  of  the  total  cost  among  these  three  factors. 
The  usual  mode  of  division  in  European  acts  has  been 
indicated  in  the  preceding  chapter.  None  of  these 
(neither  the  German  division  of  two-thirds  and  one- 
third,  nor  the  Hungarian  division  into  two  equal  parts, 
nor  even  the  British  formula  of  4sd.,  3d.,  and  2d.) 
demonstrates  the  influence  of  any  logical  basis.  The 
ratios  are  on  customary  rather  than  logical  lines. 
An  equal  division  of  the  cost  suggests  itself  as  the 
natural,  because  the  easiest,  way  of  solving  the  prob- 
lem. In  the  very  nature  of  things  the  basis  for  any 
equitable  distribution  seems  to  be  lacking.  It  is  only 
because  of  the  necessity  of  hitting  upon  a  simple 
and  fair  rule  that  an  equal  division  of  the  total  cost 
among  the  employee,  employer,  and  the  state  is  here 
suggested. 

Lacking  a  logical  foundation,  this  rule  may  not 
168 


DISTRIBUTION  OF  COST  169 

deserve  to  be  designated  as  a  standard.  The  actual 
distribution  will  in  each  case  depend  more  upon  bar- 
gaining power  and  the  interaction  of  political  influ- 
ences than  upon  any  definite  economic  or  actuarial 
reasoning.  The  representatives  of  both  the  employ- 
ers and  employees  will  naturally  strive  to  reduce  the 
burden  to  be  placed  upon  their  respective  constitu- 
ents. The  one  rule  which  may  be  justified  by  the 
more  progressive  European  acts  is  that  the  share  of 
employer  and  employee  should  be  equal,  as  would  be 
the  respective  degrees  of  participation  in  the  manage- 
ment of  funds.  Perhaps  the  hardest  bargaining  may 
take  place  in  connection  with  the  amount  of  govern- 
mental subsidy.  Compromises  may  here  be  neces- 
sary, and  in  this  connection  do  not  appear  very  dan- 
gerous. So  long  as  the  principle  of  state  participa- 
tion in  the  cost  is  carried  through,  time,  helped  by 
the  demonstration  of  the  social  value  of  the  system, 
may  be  relied  upon  to  make  this  contribution  more 
liberal,  if  necessary. 

It  is  for  this  reason  that  the  particular  basis 
of  distribution  found  in  the  bill  of  the  American 
Association  for  Labor  Legislation — 40  per  cent  by 
the  employer,  40  per  cent  by  the  employee,  and  20 
per  cent  by  the  state — may  be  approved  as  meeting 
the  requirements  of  the  particular  "  standard  "  es- 
tablished above,  at  least  half  way.  That  the  weight 
of  the  influence  of  labor-employing  capital  will  be 
used  against  any  measure  placing  an  additional 
charge  upon  them  is  perhaps  inevitable.  But  a 


170      STANDARDS  OF  HEALTH  INSURANCE 

substantial  contribution  from  the  sources  obtained 
by  general  taxation  may  create  an  opposition  from 
a  substantial  and  influential  part  of  the  population 
which  otherwise  might  not  be  inclined  to  antagonize 
it.  It  is  a  part  of  wisdom  not  to  stimulate  such 
an  opposition  by  asking  a  large  contribution  from 
the  state  before  the  public  has  learned  to  appreciate 
the  constructive  results  of  health  insurance. 


REDUCED   CONTRIBUTION  FOR  LOW-PAID   LABOR 

The  demand  for  entire  freedom  from  participation 
in  the  cost,  made  by  the  radical  wing  of  the  labor 
movement,  finds  some  justification  in  the  fact  that 
for  a  certain  proportion  of  the  wage-workers  even 
the  smallest  contribution,  in  view  of  the  low  wage- 
scale,  may  present  a  serious  hardship. 

This  objection  is  energetically  raised  by  Mr.  Webb 
in  his  Fabian  report,  and  further  emphasized  by 
the  use  of  italics. 

"  By  the  insurance  premium  the  state  is  abstract- 
ing from  each  of  their  bare  cupboards  one  loaf  of 
bread  a  week,  thereby  starving  them  still  further  into 
illness  in  order  to  pay  for  their  doctoring  and  sick- 
ness benefit  during  the  illness  which  the  state  has 
thus  helped  to  create." 

As  the  cost  of  an  effective  health-insurance  system 
must  be  substantial,  this  argument  should  not  be 
lightly  disposed  of.  Fortunately  the  British  system 
(many  features  of  which  have  been  so  peremptorily 


DISTRIBUTION  OF  COST  171 

rejected  in  this  study)  presents  in  this  connection  a 
very  interesting  and  valuable  precedent,  in  estab- 
lishing a  sliding  scale,  which  provides  for  a  higher 
contribution  from  the  employer  for  persons  of  lower- 
wage  groups. 

The  actual  contributions  for  the  lower-wage 
groups  and  the  percentages  these  respective  contri- 
butions bear  to  the  total  are  as  given  in  the  table 
on  page  172. 

The  combined  share  of  the  employer  and  the  state, 
which  represents  the  entire  subsidy  granted  by  the 
compulsory  system,  amounts  to  55.5  per  cent  in  case 
of  men  earning  over  2s.  6d.  per  diem  (about  $3.65 
per  week),  and  to  62.5  per  cent  in  case  of  all  women 
earning  over  2s.  per  diem.  It  rises  with  the  decrease 
of  wages  below  these  rather  low  limits  until  for  all 
workers  earning  less  than  36  cents  a  day,  health 
insurance  is  furnished  without  any  cost  to  them — or, 
in  other  words,  the  "  thoroughly  chimerical  and  revo- 
lutionary demand  "  of  Socialist  platforms  is  within 
certain  limits  realized  in  staid  and  practical  Great 
Britain. 

If  it  is  true  that  money  wages  on  the  whole  are 
about  twice  as  high  in  the  United  States  as  in  Eng- 
land, the  same  principle  of  total  freedom  from 
contributions  should  apply  to  all  wage-workers 
receiving  not  over  $4.38  per  week — perhaps  not  a 
large  but  still  not  an  altogether  negligible 
proportion  of  female  and  juvenile  workers  in  the 
United  States. 


172      STANDARDS  OF  HEALTH  INSURANCE 


TABLE  I 

MALE  TVORKER8 


WAGE  GROUP 
(Per  Diem) 

Employee's 
Share  Weekly 

Employer's 
Share  Weekly 

State's 
Share  Weekly 

Amount 

Per 

cent 

Amount 

Per 

cent 

Amount 

Per 

cent 

1.  Over  2s.  6d.  (nor- 
mal)   

4d. 
3d. 

Id. 
0 

44.5 
33.3 

11.1 
0.0 

3d. 
4d. 

5d. 
6d. 

33.3 
44.5 

55.6 
66.7 

2d. 
2d. 

3d. 
3d. 

22.2 
222 

33.3 
33.3 

2.  Over  2s.  but  not 
over  2s.  6d  

3.  Over  Is.  6d.   but 
not  over  2s  

4.  Not  over  Is.  6d.. 

FEMALE   WORKERS 


1.  O  ver  2s.  6d.  (nor- 
mal)   

3d. 

37.5 

3d. 

37.5 

2d. 

25.0 

2.  Over  2s.  but  not 
over  2s.  6d  
3.  Over  Is.  6d.  but 
not  over  2s  

3d. 
4d. 

37.5 
12.5 

3d. 
4d. 

37.5 
50.0 

2d. 
3d. 

25.0 
37.6 

4.  Not  over  Is.  6d.  . 

0 

0.0 

5d. 

62.5 

3d. 

37.5 

The  principle  established  by  this  provision  of  the 
British  act  is  an  admission  of  the  minimum-wage 
idea;  it  amounts  to  a  definite  policy  to  penalize  in- 
dustry for  paying  subnormal  wages.  At  least  this 
is  true  of  the  additional  contribution  exacted  from 
the  employer.  Much  less  logical  and  of  lesser  social 
value  is  the  method  of  shifting  part  of  the  cost  upon 
the  state,  unless  considered  as  an  admission  of  the 
general  concern  society  must  feel  in  that  part  of 
the  working  class  which  is  paid  these  subnormal 
wages.  But  even  the  trace  of  the  old  poor-law 
method  of  subsidizing  low  wages,  which  may  be  dis- 
covered, is  objectionable.  It  would  be  much  more 


DISTRIBUTION  OF  COST 


173 


consistent  to  charge  the  employer  for  the  entire  dif- 
ference. 

Some  such  method  of  relieving  the  groups  of 
lower  earning  capacity  seems  very  desirable  in  Amer- 
ican health-insurance  laws.  An  exact  schedule  for 
accomplishing  this  purpose  cannot  be  devised  hur- 
riedly, but,  simply  as  a  suggestion,  the  following 
schedule  adopted  by  the  Social  Insurance  Committee 
of  the  American  Association  for  Labor  Legislation 
is  offered.  Leaving  the  state  contribution,  whatever 
it  may  be,  undisturbed,  the  distribution  of  the  cost 
between  the  employer  and  employee  may  be  as  fol- 
lows: 

TABLE  II 


01 

00 

$   CU 

y 

L 

9 

«fia 

Ml 

Q"rf\ 

02  ^  ** 

i 

H 

H 

0 

If  weekly  earnings  ftre  not  under  $9  

40* 

40* 

20* 

•       "            •                under  (9  but  not  under  $8  — 

32 

48 

20 

i       it             i                   M       jg    ii      ii       ii      *7... 

24 

56 

20 

'       **             '                   "       $7    "     "       "      $6.... 

1C 

64 

20 

1       "             '                   %*       $6    "      '*       "      $5.... 

8 

72 

20 

i           it                   i                            «i          or 

0 

80 

20 

Notwithstanding  this  sliding  scale  the  bill  was  still 
criticised  for  exacting  contributions  from  the  low- 
paid  working-girls.  How  far  is  such  criticism  justi- 
fied? Anticipating  the  discussion  of  the  cost  of 
health  insurance  (see  chapter  xvi)  it  may  be  stated 
that  the  entire  cost  will  probably  vary  between  3  and 
at  the  very  utmost  5  per  cent.  The  actual  amount 
of  the  weekly  contribution  of  the  wage-worker  with 
the  above  scale  in  force  would  be  as  follows: 


174      STANDARDS  OF  HEALTH  INSURANCE 

•WHZH  TOTJLL  OOflT  OP   IXSrRASCX,  IH  PEOPOBTIOX  TO  VAOES,  IS  : 

3  per  cent  4  per  cent  5  per  cent 

If  weekly  earnings  are :           Working-men's  contribution  will  be 

Not  under  $9 lie  and  over  Me  and  over  18c  and  over 

Under  $9  but  not  under  $8 8      -     11  10-14  13-18 

"       8     -      M        "        7 5      -       8  7-10  8-13 

"       7     ••      «       «        6 *      -6  4-7  5-8 

..       6     ......        5 j      _       g  1-4  *     -       6 

"       5...  000 


Recognizing  all  that  has  been  said  and  written  on 
the  subject  of  minimum  wage,  and  the  cost  of  liv- 
ing for  the  individual  worker,  it  is  still  very  doubt- 
ful whether  these  contributions,  much  more  likely  to 
come  under  the  first  column  than  under  the  third, 
will  represent  a  serious  hardship,  in  view  of  the  re- 
turns to  be  obtained  from  them.  For  even  dispen- 
sary treatment,  which  is  supposed  to  be  free,  will  cost 
in  nominal  charges  for  consultation  and  drugs  more 
than  these  expenditures  for  weekly  dues.  For  the 
workers  earning  less  than  $7,  these  weekly  deduc- 
tions are  so  small  that  it  is  doubtful  whether  many 
employers  will  endeavor  to  make  them.  It  goes  with- 
out saying  that  the  raising  of  the  standards  so  as  to 
abolish  all  contributions  from  wages  under  $7,  in- 
stead of  under  $5,  could  meet  no  serious  criticism 
once  the  principle  is  recognized. 

It  is  evident  from  the  entire  discussion  of  the  cost 
of  insurance  and  its  distribution  among  the  several 
elements  concerned  that  there  is  no  one  definite 
economic  or  social  theory  underlying  it;  the  theory 
of  benefits  to  be  derived,  ability  to  pay,  distribu- 
tion of  responsibility  for  the  existing  amount  of 


DISTRIBUTION  OF  COST  175 

illness,  are  all  hopelessly  mixed  together.  This 
is,  however,  just  what  is  to  be  expected  from  an 
institution  which,  notwithstanding  many  evidences 
of  human  ingenuity,  represents  largely  a  histori- 
cal growth.  It  is  worth  while  to  refer  briefly 
to  a  very  interesting  and  coherent  basis  for  the 
proper  apportionment  of  the  sickness-insurance 
costs,  which  has  been  recently  advanced  by  the  well- 
known  actuary  and  student  of  social  insurance,  Mr. 
Miles  M.  Dawson,  in  a  private  discussion  with  the 
writer.1  Mr.  Dawson  finds  the  governing  principle 
of  a  proper  adjustment  of  the  cost  of  health  insur- 
ance (or  perhaps  of  all  branches  of  social  insurance) 
in  the  social  responsibility  for  the  amount  of  illness. 
Not  all  of  it  can  be  traced  to  the  industry  or  occu- 
pation; but  a  certain  proportion  can.  It  is  just, 
argues  Mr.  Dawson,  that  the  wage-worker  be  ex- 
pected to  pay  for  that  part  of  illness  which  is  normal 
and  independent  of  occupational  influences.  That 
part  of  it,  however,  which  is  due  to  those  influences 
should  be  borne  by  industry.  In  this  way  industry 
will  bear  not  an  arbitrary  proportion  of  the 
cost,  too  high  in  some  cases  and  too  low  in  others, 
but  a  share  proportional  to  the  hazard  of  disease. 

1  Mr.  Dawson's  theory  is  stated  here  by  his  special  permis- 
sion. 

Since  this  was  written,  Mr.  Dawson  has  had  the  opportunity 
of  making  a  public  statement  of  this  theory  at  the  hearing  be- 
fore the  Committee  on  Judiciary  of  the  New  York  Senate,  held 
on  March  14,  1916,  at  Albany,  New  York.  See  the  Monitor  for 
April,  1916. 


176      STANDARDS  OF  HEALTH  INSURANCE 

It  may  be  difficult  to  apportion  in  each  industry  the 
amount  of  existing  illness  according  to  the  respon- 
sibility, but  a  broad  statistical  rule  may  be  estab- 
lished. The  occupation  with  the  lowest  sickness 
rate  may  be  accepted  as  the  normal  standard. 
The  excess  of  the  actual  sickness  rate  over  this 
normal  may,  with  fair  justice,  be  assigned  to 
occupational  causes.  If,  e.g.,  according  to  the  data 
of  the  Leipzig  sickness  fund  for  1887-1905,  the 
average  number  of  days  of  sickness  per  annum  for 
salesmen,  clerks,  etc.,  from  twenty-five  to  thirty- 
four  years  old  is  8.68,  and  for  excavators,  construc- 
tion workers,  etc.,  rises  to  12.03,  then  the  difference 
of  the  Leipzig  sickness  fund  for  1887-1905,  the 
influences,  and  for  the  latter  group  the  employer's 
contribution  should  constitute  seven-tenths  of  the 
cost. 

The  principle  seems  to  be  sound.  Since  the  aver- 
age rate  of  sickness  for  this  age  group  was  ascer- 
tained to  be  about  7.79,  the  employer's  share  on  the 
average  would  amount  to  some  53  per  cent,  and  the 
wage-workers',  47  per  cent.  If  all  ages  are  roughly 
thrown  together  the  rate  for  the  office  employees  is 
4.92  days  per  annum,  and  for  all  trades  9.43,  and 
the  division  again  appears  to  be  about  equal.  An 
equal  division  of  the  cost  between  the  employer  and 
employee  appears  essentially  just  on  the  whole,  but 
not  as  between  one  industry  and  another. 

There  are  of  course  many  practical  difficulties  in 
the  way.  What  statistics  shall  be  adopted  as  con- 


DISTRIBUTION  OF  COST  177 

elusive?  Shall  the  basis  be  the  average  rate  of  an 
industry  in  which  there  may  be  a  number  of  different 
occupations?  The  administrative  problems  of  as> 
certaining  the  proper  distribution  may  be  complex. 
Nevertheless,  there  is  an  important  element  of  truth 
in  this  suggestion,  which  will  bear  careful  investiga- 
tion in  the  future.  It  is,  however,  an  entirely  new 
suggestion,  not  as  yet  realized  anywhere,  and  at  this 
time  it  cannot  claim  its  place  in  the  brief  list  of  defi- 
nite standards. 


XII 
ORGANIZATION  OF  INSURANCE 

AFTER  the  substance  of  health  insurance — i.e.,  the 
benefits  to  be  granted  and  the  services  to  be  rendered 
— have  been  decided  upon,  the  question  of  method 
arises.  How  shall  this  system  of  compulsory  insur- 
ance be  organized?  The  experience  with  the  de- 
velopment of  compensation  and  industrial  insurance 
in  the  United  States  has  already  somewhat  familiar- 
ized the  American  people  with  the  various  problems 
of  social-insurance  organization.  In  health  insur- 
ance, however,  these  problems  are  of  very  much 
greater  moment,  their  discussion  must  be  very  much 
more  careful,  and  an  early  decision  as  to  the 
particular  form  of  insurance  to  be  selected  is  of  pri- 
mary importance  for  the  successful  development  of 
the  entire  plan. 

In  compensation  insurance,  the  essential  problem 
is  that  of  regulating  the  duties  of  one  social  class  to 
the  other.  The  extent  of  these  duties  must  be  very 
clearly  stated,  while  in  the  method  of  meeting  them 
a  certain  latitude  may  be  permitted.  A  compensa- 
tion law  only  establishes  the  employer's  liability  on 
a  new  basis.  If  the  insurance  method  is  made  com- 
pulsory, it  is  largely  for  the  purpose  of  securing 

178 


ORGANIZATION  OF  INSURANCE         179 

the  payment  of  benefits  established  by  the  law.  In 
actual  practice,  as  it  has  developed  in  Europe  as  well 
as  in  the  United  States,  a  great  variety  of  insurance- 
carriers  conduct  compensation  insurance,  beginning 
with  private-stock  insurance  companies,  and  up  to 
purely  governmental  insurance  funds. 

Thus  one  finds  that  state  insurance  is  the  exclu- 
sive form  in  Washington,  West  Virginia,  Oregon, 
and  Wyoming,  and  also  (with  a  few  exceptions)  in 
Ohio.  State  insurance  funds  exist  side  by  side  with 
private  commercial  insurance-carriers  in  California, 
Colorado,  Michigan,  Maryland,  New  York,  Penn- 
sylvania, while  in  most  of  these  states  and  many 
others  mutual  insurance  of  employers  is  not  only 
permitted  but  even  encouraged,  and  at  least  in  two 
states  government  authority  has  organized  mutuals, 
leaving  them  in  the  hands  of  the  membership.  More- 
over, in  the  face  of  many  forms  of  insurance-carriers, 
only  in  a  very  few  states  is  insurance  quite  compul- 
sory ;  in  West  Virginia,  Massachusetts,  Texas,  com- 
pensation is  elective  but,  once  accepted,  insurance 
compulsion  follows;  in  many  states,  while  insurance 
is  ostensibly  compulsory,  yet  self-insurance  is  recog- 
nized as  one  of  the  many  forms  of  insurance,  and 
self-insurance  simply  means  .relief  from  insurance 
compulsion  upon  sufficient  evidence  of  solvency; 
finally,  in  a  few  states  no  requirement  at  all  as  to  in- 
surance is  found  in  the  law. 

In  other  words,  the  insurance  features  are  recog- 
nized as  of  secondary  importance,  and  the  heated  dis- 


180      STANDARDS  OF  HEALTH  INSURANCE 

cussions  of  these  features  are  largely  due  to  the  strug- 
gle of  commercial  insurance  to  remain  in  this  branch, 
which  as  yet  has  proven  to  be  fairly  profitable. 

Competition  is  frequently  allowed  between  insur- 
ance-carriers of  different  types  because  it  is  believed 
that  such  competition  will  reduce  the  cost  of  insur- 
ance. It  is  usually  assumed  that  the  employers' 
class,  being  the  class  possessing  business  sense,  will 
be  able  to  decide  as  to  the  comparative  advantages 
of  the  different  insurance-carriers.  Of  course,  public 
control  over  the  private  insurance-carriers  is  often 
found  necessary,  in  order  to  secure  fair  adjustments 
of  claims.  Where  state  insurance-carriers  conduct 
the  business,  they  are  usually  self-supporting.  If  a 
state  subsidy  is  given,  protests  are  frequently  heard 
that  this  is  an  unjustifiable  dissipation  of  public 
funds  for  the  purpose  of  subsidizing  private  em- 
ployers, who  are  not  the  objects  of  social  insurance. 

The  situation  is  evidently  different  in  case  of 
health  insurance,  where  a  considerable  share  of  the 
cost  is  borne  by  the  very  class  whose  economic  in- 
terests are  to  be  protected.  Contributions  from  the 
employer,  and,  in  some  countries,  from  the  public 
treasury  as  well,  are  justified  largely  by  the  inability 
of  the  wage-workers  to  meet  the  entire  cost. 

The  object  of  social  health  insurance  is  to  give  the 
insured  as  large  a  return  for  their  contributions  as 
possible.  As  a  result,  practically  all  social  insur- 
ance against  sickness  in  Europe  is  conducted  by 
institutions  or  organizations  of  a  public  character, 


ORGANIZATION  OF  INSURANCE          181 

with  the  element  of  commercial  profit  entirely  elimi- 
nated. 

As  to  the  actual  type  of  the  institution,  there  is 
considerable  variation.  In  American  literature  the 
term  "  social  insurance  "  is  often  used  interchange- 
ably with  "  state  insurance."  Yet  there  is  very  little 
direct  "  state  insurance  "  in  the  field  of  health  insur- 
ance, such  as  is  found  in  the  German  old-age  in- 
surance system,  or  in  the  various  state  insurance 
organizations  provided  for  compensation  insurance  in 
several  American  states.  The  term  "  state  insur- 
ance "  may  be  applied  only  in  the  sense  of  a  very 
definite  control,  supervision,  regulation,  and  finan- 
cial subsidy.  But  in  face  of  all  these  facts,  a  public 
co-operative  institution  may  be  very  distinct  from  a 
state  institution. 

Perhaps  the  British  system  of  all  European  sys- 
tems of  sickness  insurance  comes  near  to  being  a 
state  insurance  system,  but  even  then,  as  will  be 
explained  presently,  the  insured  individual  deals  with 
a  public  organization  of  a  local  character,  and  only 
the  latter  carries  on  certain  financial  transactions 
with  the  state. 

It  is  important  to  keep  in  mind  this  distinction 
beween  "  state  "  and  "  public  "  insurance-carriers, 
because  already  there  may  be  observed  symptoms 
of  a  tendency  in  this  country  to  carry  the  principle 
of  direct  state  insurance  from  compensation  into 
the  sickness  field.  At  least  a  few  bills  have  been 
drawn  to  that  effect.  It  is  too  early  to  say  whether 


182      STANDARDS  OF  HEALTH  INSURANCE 

even  in  compensation  the  principle  of  bureaucratic 
state  insurance  has  proved  a  success.  But  the  entire 
growth  of  health  insurance  has  been  through  de- 
velopment of  co-operative  effort  and  democratic 
organization,  and  their  results  are  too  great  to  be 
neglected  in  favor  of  purely  bureaucratic  manage- 
ment. 

As  already  indicated,  the  type  of  health-insurance 
organizations  must  largely  depend  upon  the  generic 
plan  of  insurance,  whether  it  is  voluntary  or  compul- 
sory, and  if  the  latter,  whether  the  compulsion  to 
insure  leaves  the  choice  of  the  particular  carrier 
free  to  the  individual.  In  the  three  countries  taken 
as  types,  all  the  three  forms  may  be  recognized. 

In  Denmark,  the  whole  organization  being  volun- 
tary, insurance  is  carried  on  by  voluntary  "  recog- 
nized "  societies.  The  state  grants  "  recognition  " 
and  subsidies,  in  return  for  which  it  retains  the  right 
of  supervision,  and  prescribes  certain  conditions 
which  tend  to  standardize  the  activity  of  the  fund. 
The  one  definite  requirement  which  it  must  strictly 
enforce  is  that  the  organization  receiving  recognition 
and  subsidy  be  kept  free  from  any  private  profit- 
making. 

Impartially  the  state  is  ready  to  encourage  all 
types  of  organization,  and  if  nearly  95  per  cent  of 
these  funds  are  of  the  local  type,  embracing  members 
of  different  trades  and  occupations,  in  a  definite 
locality,  that  is  the  result  of  spontaneous  growth. 
The  remaining  funds  are  either  "  trade  funds  "  or 


ORGANIZATION  OF  INSURANCE         183 

factory  or  establishment  funds,  also  local  in  their 
character. 

Undoubtedly  establishment  funds  have  a  certain 
administrative  advantage,  provided  they  are  big 
enough  for  insurance  purposes.  Trade  funds  have 
the  actuarial  advantage  of  a  tendency  toward  greater 
uniformity  of  sick  rate,  but  they  are  practical  in 
large  cities  only. 

The  variety  of  health-insurance  funds  existing  in 
Germany  has  often  been  noted  in  American  writings. 
It  is  unnecessary  to  go  over  the  details  of  the  dif- 
ferent funds — local  sick  funds,  establishment  funds, 
building,  miners',  and  other  trade  funds,  mutual 
aid  funds,  and  the  recently  organized  rural  sick 
funds. 

Nevertheless,  the  German  system  is  built  upon  the 
principle  of  Zwangsversicherung — i.e.,  insurance 
with  prescribed  carriers.  The  seeming  inconsistency 
between  the  principle  of  Zwangsversicherung  and  the 
variety  of  existing  types  is  not  sufficiently  under- 
stood by  American  students  and  requires  some  ex- 
planation. 

All  compulsory  health  insurance  has  grown  out  of 
voluntary  mutual  insurance.  The  situation  found  in 
Denmark  at  present  existed  in  Germany  at  the  time 
the  sickness-insurance  law  was  adopted,  though  per- 
haps not  in  the  same  degree.  The  existing  spon- 
taneous institutions  (local,  trade,  and  establish- 
ment funds)  were  too  valuable  to  be  destroyed; 
besides,  to  destroy  them  would  have  created  a  serious 


184      STANDARDS  OF  HEALTH  INSURANCE 

opposition  to  the  whole  plan.  The  existing  institu- 
tions were  preserved,  and  even  the  future  forma- 
tion of  such  forms  of  sick  funds,  which  often  have 
their  distinct  advantages,  was  provided  for.  Never- 
theless, the  ideal  or  normal  types  were  indicated  in 
the  law.  These  are  the  local  funds,  either  for  all 
trades,  or  for  special  trades,  and  establishment  funds. 

Notwithstanding  the  multiplicity  of  funds,  the 
choice  is  not  left  to  the  individual  (except  for  the 
mutual-aid  funds,  referred  to  presently).  The  or- 
ganization of  exceptional  funds  was  made  subject  to 
collective  decision  and  governmental  approval. 
Nevertheless,  the  history  of  thirty  years  of  insur- 
ance has  indicated  the  preference  for  local  funds 
over  all  others,  even  over  the  establishment  funds. 
Within  the  local  funds  themselves,  a  process  of  con- 
solidation is  taking  place. 

The  inclusion  by  the  act  of  1911  of  the  two  large 
groups,  domestics  and  farmhands,  led  to  the  estab- 
lishment of  a  new  type,  the  so-called  rural  fund, 
which  is  also  a  local  fund  for  workers  of  a  lower 
wage  scale.  Out  of  some  20,000,000  insured,  about 
7,500,000  are  insured  in  local  funds,  another  7,500,- 
000  in  "  rural "  funds,  and  3,000,000  in  establish- 
ment funds,  leaving  only  2,000,000  for  all  other 
forms  of  funds. 

Among  the  local  funds,  the  Leipzig  fund,  which 
embraces  the  whole  city,  is  justly  famous.  Member- 
ship in  mutual-aid  funds  (comparable  to  friendly 
societies  or  fraternal  orders)  as  a  substitute  for  in- 


ORGANIZATION  OF  INSURANCE         185 

surance  in  the  compulsory  institutions  is  only  toler- 
ated, and  at  the  price  of  forfeiting  the  employer's 
contribution. 

It  is  not  difficult  to  ascertain  the  reasons  for  this 
tendency.  Health  insurance  is  primarily  a  matter 
for  local  administration.  A  great  deal  must  be  lost 
by  the  geographic  extension  of  the  organization. 
For  one  thing,  the  control  over  the  beneficiaries  is 
simplified  by  localization.1  The  financing  is  made 
very  much  cheaper,  for  the  amounts  dealt  with,  both 
in  the  income  and  in  the  outgo,  are  small.  And  per- 
haps the  most  important  factor  is  the  facility  of 
organizing  proper  medical  help,  which  is  a  very  diffi- 
cult undertaking  for  an  organization  with  a  scat- 
tered membership.  Even  the  establishment  funds, 
though  possessing  the  advantages  enumerated  above, 
are  not  so  desirable  as  the  ordinary  local  funds,  be- 
cause of  the  predominating  importance  of  one  em- 
ployer and  the  financial  danger  which  may  develop 
out  of  one  localized  epidemic. 

Although  the  British  National  Insurance  act  has 
made  very  extensive  use  of  German  precedents,  yet 
the  organization  of  the  health-insurance  system  in 
Great  Britain  has  been  built  on  diametrically  oppo- 

1  See  "  Appendix  to  the  Report  of  the  Departmental  Com- 
mittee on  Sickness  Benefit  Claims  under  the  National  Insur- 
ance Act,"  especially  Vol.  I  of  the  "  Minutes  of  Evidence," 
for  evidence  of  the  serious  administrative  difficulties,  espe- 
cially in  respect  to  medical  aid  and  duplication  of  expense, 
because  of  centralization  of  the  work  in  home  offices  of  large 
"approved"  societies  in  Great  Britain. 


186      STANDARDS  OF  HEALTH  INSURANCE 

site  lines.  Its  basis  is  unrestricted  freedom  of  choice 
as  to  the  insurance-carrier.  It  is  quite  well  under- 
stood that  this  is  in  deference  to  the  strong  British 
friendly  societies,  which  correspond  to  the  German 
mutual-aid  funds  (Hilfskassen)  but  have  reached  a 
very  much  greater  degree  of  development.  Not  only 
did  the  British  law  leave  these  organizations  undis- 
turbed, it  even  refused  to  prescribe  a  definite  form 
of  organization  to  supplement  them.  It  is  perhaps 
idle  to  speculate  whether  the  authors  of  the  British 
act  were  wise  in  this  decision.  The  compromise  was 
forced  upon  the  British  government  by  the  strength 
of  the  friendly  societies,  for  it  is  quite  certain  that 
no  bill  could  have  passed  in  face  of  a  united  opposi- 
tion of  the  five  or  six  millions  of  members  of  friendly 
societies. 

The  British  system  is  therefore  based  upon  a  vol- 
untary choice  of  membership  in  some  recognized 
mutual  organization.  At  the  same  time  the  organi- 
zations have  a  practically  unrestricted  right  of  re- 
jection of  members  (because  the  prohibition  of 
rejection  on  the  ground  of  age  cannot  be  of  practical 
value). 

What  were  the  practical  results  of  this  system? 

1.  While  it  is  true  that  the  membership  of  the 
friendly  societies  has  increased  considerably,  the 
most  noteworthy  feature  was  the  establishment  of 
"  recognized "  societies  by  private  industrial  life- 
insurance  companies,  the  membership  of  which  ex- 
ceeds five  millions.  While  these  "  societies  "  are  sub- 


ORGANIZATION  OF  INSURANCE         187 

ject  to  the  requirements  of  the  law  as  to  prohibition 
of  profits  and  as  to  democratic  management,  it  is 
nevertheless  very  doubtful  whether  this  strengthen- 
ing of  the  industrial  companies  was  contemplated  by 
the  National  Insurance  act. 

As  a  matter  of  fact  experience  has  demonstrated 
that  very  little  if  any  democracy  was  left  in  the  or- 
ganization of  the  six  approved  societies  of  the  Pru- 
dential Insurance  Company.  "  It  is  ludicrous," 
says  Mr.  Webb,2  "  to  talk  of  democratic  self-govern- 
ment in  the  gigantic  new  societies  with  hundreds  of 
thousands  of  members  scattered  all  over  the  King- 
dom, but  controlled  by  a  strictly  centralized  adminis- 
tration the  nature  of  which  probably  none  of  them 
understand."  And  while  it  is  generally  admitted  that 
the  administration  of  these  societies  has  on  the  whole 
been  satisfactory  to  their  members,  yet  the  practical 
denial  of  the  democratic  spirit  must  be  a  distinct 
loss,  because  it  fails  to  arouse  the  membership  to  a 
sense  of  responsibility,  and  to  stimulate  the  work  for 
disease  prevention  among  them.  In  fact  it  is  even 
questioned  whether  the  organization  of  these  "  Pru- 
dential "  societies  fulfils  the  object  of  the  law  which 
requires  democratic  administration. 

2.  The  lack  of  strict  geographic  limits  of  the 
activity  of  the  friendly  societies  has  created  a  very 
complex  administrative  problem  of  the  "  isolated 
member."  In  every  large  English  city  thousands  of 
organizations  have  their  representatives.  The  de- 

*New  Statesman,  Special  Supplement,  March  14,  1914. 


188      STANDARDS  OF  HEALTH  INSURANCE 

gree  of  participation  of  these  members  in  the  affairs 
of  the  societies  must  necessarily  be  purely  nominal, 
the  control  of  the  society  over  the  beneficiaries  diffi- 
cult, malingering  must  necessarily  be  stimulated. 
The  relation  which  must  eventually  prevail  is  rather 
that  of  an  insured  to  the  insurance-carrier  than  of 
a  member  of  a  co-operative  institution  to  his  fellow- 
members. 

3.  A    direct    relationship    between    the    friendly 
society  and  the  medical  organization  became  quite 
impossible,  especially  because  of  the  lack  of  corre- 
spondence   between    geographic    limits    and    society 
limits.    A  very  complex  organization  of  medical  aid 
became  necessary  whose  working  efficiency  compared 
with  that  in  Germany  must  be  low.     The  very  task 
of  bringing  the  physician  and  the  insured  together 
became  a  matter  of  great  difficulty,  requiring  a  com- 
plex system  of  various  card  catalogues  with  many 
millions  of  cards. 

4.  Finally,  the  system  created  the  problem  of  the 
uninsured,  either  because  of  unwillingness  or  because 
of  inability  to  obtain  membership  in  a  "  recognized  " 
society.     The  solution  of  this  problem  by  establish- 
ing the  so-called  "  post-office  contributors  "  is  not 
a  very  happy  one,  since  these  are  insured  only  up 
to  the  amount  of  their  individual  contributions,  or 
rather  not  insured  at  all,  but  required  to  start  com- 
pulsory saving  accounts  of  very  little  value.     It  is 
true  that  the  number  of  these  residual  "  contribu- 
tors "  is  not  very  large — only  about  half  a  million. 


ORGANIZATION  OF  INSURANCE          189 

Nevertheless  they  present  an  additional  argument 
against  the  unsatisfactory  methods  of  organization 
of  the  British  health-insurance  system. 

The  experience  of  other  countries  corroborates 
that  of  Germany.  In  Austria  practically  the  same 
situation  exists,  with  a  variety  of  insurance-carriers 
of  different  types,  but  the  local  society  predominat- 
ing and  the  selection  of  the  carrier  being  largely  a 
collective,  and  not  an  individual  matter.  In  Russia 
the  prescribed  type  is  the  establishment  fund  (the 
sick  benefit  society  of  one  industrial  establishment) 
or  the  combined  fund  of  several  smaller  establish- 
ments ;  but  this  is  largely  explained  by  the  fact  that 
the  Russian  act  of  1912  is  primarily  limited  to 
factory  employees.  In  Norway,  Servia,  Roumania, 
and  the  latest  addition  to  health  insurance,  Holland, 
new,  largely  local,  funds  have  been  created,  al- 
though in  most  counties  workmen  are  permitted  to 
retain  their  insurance  in  other  existing  organiza- 
tions. 

What  is  the  lesson  of  European  experience  in 
regard  to  the  most  practical  and  efficient  method  of 
social  insurance  against  sickness  which  should  be 
advocated  in  this  country? 

The  first  lesson  is  obvious — that  private  insur- 
ance enterprises  operating  for  profit  have  absolutely 
no  place  in  the  scheme.  The  English  exception  is 
only  a  seeming  one,  because,  while  the  Prudential 
and  other  industrial  insurance  companies  have  suc- 
ceeded in  organization  of  over  5,000,000  persons 


190      STANDARDS  OF  HEALTH  INSURANCE 

into  their  societies,  yet  they  do  not  constitute  a 
part  of  the  insurance  enterprise  and  no  profit  can 
be  received  from  them,  except  indirectly.  It  is  gen- 
erally understood  that  the  object  of  the  British 
Prudential  Insurance  Company  in  organizing  these 
approved  societies  was  primarily  to  protect  its  life- 
insurance  business. 

The  claims  of  the  private  commercial  insurance 
companies  writing  accident  and  health  in  this  coun- 
try are  more  far-reaching.  While  the  smaller  com- 
panies, which  write  almost  exclusively  this  so-called 
"  industrial  health  business,"  have  energetically  pro- 
tested against  social  health  insurance  as  likely  to 
injure  their  business  interests,3  suggestions  are  al- 
ready being  made  that  private  stock  insurance 
companies,  operating  for  profit,  may  be  utilized  in 
this  branch  of  social  insurance  as  they  have  been  in 
compensation. 

There  can  be  very  little  doubt  that  when  the  legis- 
lative progress  of  compulsory  health  insurance  is 
sufficiently  advanced,  energetic  efforts  will  be  made 
to  swing  legislation  in  that  direction.  It  is  wise, 
therefore,  to  face  this  question  squarely  at  the  out- 
set. In  arriving  at  a  decision,  the  following  cir- 
cumstances must  be  taken  into  consideration: 

'  See  "  The  Health  and  Accident  Underwriters'  Conference 
held  at  Cincinnati,  Ohio,  February  25,  1916,"  as  reported  in  the 
insurance  papers  for  that  period,  particularly  the  paper  by 
Mr.  T.  Leigh  Thompson,  "  The  Un-American  Doctrine  of 
State  Compulsory  Health  Insurance,"  Economic  World, 
March  4,  1916. 


ORGANIZATION  OF  INSURANCE         191 

1.  European  experience  is  unanimously  opposed 
to  such  a  plan.     There  is  not  a  single  precedent  in 
favor   of   such   a   course,   though   private   compen- 
sation insurance  is  admitted  in  many  countries,  such 
as    Great   Britain,   Italy,    France,   Belgium,   Spain, 
Sweden,  and  others. 

2.  While  the  compulsory  system  calls  for  no  ex- 
pensive agency  system  for  solicitation  of  business, 
such  a  system  will  persist  under  the  management  of 
stock  companies,  for  the  purpose  of  inter-company 
competition.     Thus   another  substantial  channel  of 
economic  waste  will  be  preserved.4 

3.  The   introduction   of  private   insurance  busi- 
ness and  the  underlying  element  of  profit  will  make 
the    administrative   problems    of   claim    adjustment 
very  much  more  difficult.     At  best,  one  must  not 
close  one's  eyes  to  the  possibility  of  disagreements 
and    misunderstandings    between    insurance    carrier 
and  claimant,  especially  in  the  early  stages.     These 
conditions  must  be  aggravated  by  the  existence  of 
the  motive  of  private  gain. 

4.  The  past  experience  with  private  accident  and 

4"A  number  of  companies  are  offering  the  policy  fee  (i.e., 
the  initial  payment  made  by  the  insured  at  the  time  of  issue 
of  policy),  the  first  month's  premium,  35  per  cent  of  renewal 
premiums,  and  allowances  for  rent  and  expenses.  ...  In 
1914  the  total  agency  or  acquisition  cost  of  business  was  32.93 
per  cent,  in  1915  32.85  per  cent,  an  increase  of  .62  of  1  per 
cent."  Address  of  Mr.  Louis  H.  Fibel  at  the  regular  meeting 
of  the  Health  and  Accident  Underwriters'  Conference  at 
Cincinnati,  Feb.  25,  1916. 


192      STANDARDS  OF  HEALTH  INSURANCE 

health  insurance  among  working-men  in  the  United 
States  offers  very  little  support  in  favor  of  such 
contention.  In  a  very  comprehensive  investigation  of 
14  companies,  writing  this  form  of  insurance,  under- 
taken in  1911  by  a  committee  of  the  National  Con- 
vention of  Insurance  Commissioners,5  the  conditions 
discovered  were  characterized  by  the  committee  as 
"  deplorable."  6 

In  the  guarded  language  of  the  report  "  the  Com- 
mittee feels  warranted  in  concluding  that  when  deal- 
ing with  companies  doing  an  industrial  health  or 
accident  business,  the  policy-holder  public  of  the 
country — particularly  those  who  through  ignorance 
or  poverty  are  unable  to  protect  themselves,  and 
therefore  are  particularly  the  wards  of  the  govern- 
ment— has  too  frequently  been  the  victim  of  uncon- 
scionable practices  in  the  claim  departments  of  the 
companies." 7  Pages  could  be  filled  with  the  disgusting 
details  of  the  deceptions  practised,  but  it  is  sufficient 
to  state  that  in  the  case  of  the  largest  and  perhaps 
the  worst  of  these  concerns  the  insurance  authorities 
demanded  and  obtained  the  resignation  of  the  man- 
ager of  the  claim  department,  his  wife,  brother, 
and  brother-in-law,  all  of  whom  were  employed 

*See  Investigation  of  Settlements  with  Policyholders  by 
Companies  Doing  an  Industrial  Health  and  Accident  Business, 
being  Vol.  II  of  Proceedings  of  the  National  Convention  of 
Insurance  Commissioners  of  the  United  States,  held  at  Mil- 
waukee, Wis.,  Aug.  22-25,  1911. 

•  Ibid.,  p.  87. 

*  Ibid.,  p.  88. 


ORGANIZATION  OF  INSURANCE         193 

in  the  same  company  and  were  directly  concerned 
in  the  reprehensible  practices.  And  perhaps  noth- 
ing better  illustrates  the  morale  of  the  business  than 
the  fact  that  the  gentleman  in  question  had  no  diffi- 
culty in  obtaining  an  important  position  with  an- 
other concern  and  remained  a  leader  in  the  business. 

5.  Even  though  such  conditions  are  not  univer- 
sal, and  some  improvement  may  have  taken  place 
within  the  last  five  years,  the  fact  remains  that  the 
loss  ratio — i.e.,  the  proportion  between  the  amount 
paid  out  for  claims  and  the  premiums  collected — 
varied  from  30.6  to  46  per  cent,  that  is,  the  ex- 
penses  of  conducting  the  business   and  the  profits 
absorbed  from  54  per  cent  to  70  per  cent  of  the 
premiums.     Only  in  the  case  of  2  companies  did  the 
loss  ratio  rise  above  41  per  cent,  and  in  the  case 
of  8  companies  it  was  less  than  37.5  per  cent.8 

6.  The  organization  of  medical  aid  for  the  pur- 
pose of  making  health  insurance  a  measure  of  pre- 
vention and  cure  as  well  as  of  relief  would  be  made 
very   much   more   difficult   under  private   insurance 
management.      The   safety   work   of  private   insur- 
ance companies  has  been  emphasized  perhaps  unduly, 

• "  Claims  and  claim  expense  [i.e.,  expenses  in  connection  with 
adjustment  of  claims]  absorbed  in  1914  45.18  per  cent  of  the 
premiums  and  in  1915  44.79  per  cent,  a  reduction  of  .39  of 
1  per  cent.  ...  It  would  seem  that  we  are  now  returning  to 
our  patrons  a  very  fair  percentage  of  the  premiums  they  pay 
us  [sic!].  It  would  be  a  splendid  thing  for  all  concerned  if 
this  ratio  could  be  larger,  but  present  conditions  do  not  seem 
to  warrant  it."— Louis  H.  Fibel,  toe.  cit. 


194,      STANDARDS  OF  HEALTH  INSURANCE 

because  obviously  the  reduction  of  hazard  may  result 
in  commercial  advantage.  But  while  such  harmony 
between  sound  business  considerations  and  social  wel- 
fare may  occur,  it  is  evidently  undesirable  to  make 
the  important  work  of  health  conservation  depend 
upon  the  possibility  of  commercial  gain.  In  so  far 
as  reduction  in  morbidity  may  result  in  savings,  these 
savings  should  accrue  to  the  working  class,  and  not 
to  outside  profit-seeking  interests. 

7.  Private  organization  of  insurance  would  alto- 
gether destroy  an  advantage  of  direct  participation 
of  all  parties   concerned    (both  employer   and  em- 
ployee) in  the  health-conservation  campaign. 

8.  Little  can  be  expected  of  voluntary  extension 
of  the  insurance  benefits  beyond  the  required  mini- 
mum.     Many  other   considerations   might   be   men- 
tioned.    Enough  has  been  said,  however,  to  indicate 
that  the  permission  to  stock  insurance  companies  to 
extend  their  activities  into  the  field  of  social  health 
insurance  would  result  in  very  serious  harm  to  the 
entire    movement.      This    is    so   well    recognized   in 
Europe  that  the  suggestion  was  not  even  seriously 
made. 

The  case  is  perhaps  not  so  strong  against  the 
participation  of  mutual  private  insurance  companies. 
For  one  thing,  one  element  of  profit,  dividends  to 
stockholders,  has  been  eliminated  through  the  recent 
mutualizations  of  the  large  industrial  life-insurance 
companies.  The  wide  and  often  highly  useful  activ- 
ity of  some  of  these  companies  in  the  field  of  preven- 


ORGANIZATION  OF  INSURANCE         195 

tion,  dissemination  of  useful  knowledge,  collection  of 
valuable  statistics,  is  mentioned  as  an  argument  in 
their  favor.  And  yet,  at  least  some  of  the  arguments 
above  enumerated  retain  their  force.  The  democracy 
of  mutual  insurance  companies  with  millions  of 
policy-holders,  scattered  over  the  land,  after  all  ex- 
ists purely  on  paper.  And  while  the  present  manage- 
ment is  admittedly  both  efficient  and  honest,  there 
seems  to  be  little  reason  for  turning  over  into  their 
hand  an  institution  of  tremendous  social  value,  which 
should  develop  into  a  powerful  school  of  efficient 
self-government  for  the  millions  of  wage-workers. 

It  seems  equally  certain  that  the  lesson  of  Euro- 
pean experience  is  not  in  favor  of  the  method  of 
direct  insurance  by  the  state.  In  a  certain  sense  the 
British  system  may  be  described  as  such  a  direct 
system.  Though  ostensibly  based  upon  a  freedom 
of  choice  as  to  the  insurance-carrier,  and  shaped  with 
due  and  perhaps  excessive  regard  to  the  wishes  of 
friendly  societies,  it  nevertheless  concentrates  the 
financial  transactions  in  a  governmental  commission, 
where  a  bewilderingly  complex  system  of  bookkeep- 
ing controls  the  income  and  outgo  of  every  "  ap- 
proved "  society,  the  transfers  of  membership,  and 
the  resulting  movements  of  reserve  values,  etc.  The 
system  is  "  national  "  in  that  it  embraces  the  whole 
nation,  but  is  largely  governmental  in  its  operation, 
and  much  less  '*  national "  in  the  better  sense  than  is 
the  German  system. 

Outside  of  this  one  precedent  the  entire  lesson  of 


196      STANDARDS  OF  HEALTH  INSURANCE 

history  is  in  favor  .of  the  "  local "  public  fund, 
whether  built  upon  trade  lines,  where  the  number  of 
insured  is  sufficiently  large,  or  embracing  all  the 
wage-workers  of  a  locality.  Of  course  no  purely 
mechanical  regularity  as  to  these  local  funds  need 
be  required.  As  a  rule  it  is  desirable  that  they  agree 
with  the  political  subdivision,  whether  it  be  a  county, 
township,  or  school  district.  In  larger  cities  the 
organization  of  numerous  funds  may  be  encouraged 
in  the  beginning,  because  the  administrative  problems 
of  such  large  funds  as  that  of  Leipzig  are  complex 
and  should  not  be  handled  lightly. 

While  the  "  local "  fund  should  be  put  forth  as 
the  new  organization  to  be  created  by  the  law,  and 
also  the  typical  one,  it  must  not  be  made  exclusive. 
The  existing  conditions  and  organizations  must  be 
carefully  reckoned  with.  In  approaching  the  prob- 
lem of  health  insurance  the  United  States  finds  itself 
in  about  the  situation  in  which  Germany  was  thirty 
years  ago.  All  kinds  of  voluntary  sickness-insurance 
carriers  exist,  though  the  actual  extent  of  their 
operations  is  unknown.  A  governmental  investiga- 
tion some  seven  or  eight  years  ago  indicated  a  mem- 
bership of  a  little  over  one  million,  but  failed  to 
canvass  the  entire  field,  especially  as  to  establishment 
funds  and  local  sick-benefit  societies.9  Since  then  the 
development  of  establishment  and  other  funds  has 

•  See  "  Health  Insurance,  Its  Relation  to  the  Public  Health," 
by  B.  S.  Warren  and  E.  Sydenstriker  (U.  S.),  Public  Health 
Bulletin  No.  76,  p.  50. 


ORGANIZATION  OF  INSURANCE         197 

been  very  rapid.  Perhaps  fortunately,  the  American 
fraternal  orders  corresponding  to  the  English 
friendly  societies  have  selected  the  field  of  life  insur- 
ance rather  than  that  of  health  insurance,  and  there- 
fore the  influence  of  the  existing  organizations  will 
not  be  so  great  as  it  was  in  Great  Britain. 

Yet  already  at  the  recent  hearing  in  Albany  rep- 
resentatives of  fraternal  orders  protested  against  the 
health-insurance  bill  on  the  plea  that  it  may  inter- 
fere with  the  development  of  their  organizations.  It 
is  understood  that  several  fraternal  orders  have  re- 
cently made  efforts  to  develop  sick  benefits  within 
their  organization,  but  no  one  can  tell  with  any  de- 
gree of  certainty  how  far  their  development  has  pro- 
ceeded. The  representative  of  the  fraternals  spoke 
of  the  "  thousands  "  already  insured  against  sick- 
ness, and  the  natural  rejoinder  followed  that  com- 
pulsory health  insurance  had  in  mind  millions  and 
not  thousands.10 

Be  it  as  it  may,  no  unnecessary  opposition  need  be 
created,  and  some  place  must  be  provided  for  the 
existing  efficient  organization. 

The  following  forms  of  health  insurance,  already 
existing  or  to  be  created,  may  therefore  be  easily 
incorporated  in  the  general  scheme. 

10  See  report  of  the  testimony  in  the  Monitor,  official  publica- 
tion of  Associated  Manufacturers  and  Merchants,  Vol.  II,  No. 
10.  Buffalo,  March,  1916. 


198      STANDARDS  OF  HEALTH  INSURANCE 

TRADE    FUNDS 

In  large  centers  these  undoubtedly  have  a  certain 
advantage  of  community  of  interests  between  work- 
ers in  the  same  trades.  Besides,  the  existing  trade- 
union  health-insurance  funds  may  be  readily  ad- 
justed so  as  to  fall  in  with  the  general  scheme  as 
here  outlined.  In  the  larger  cities,  the  presence  of 
a  cosmopolitan  and  polyglot  population  may  make 
large  local  funds  somewhat  difficult,  and  in  view  of 
the  well-known,  tendency  of  many  nationalities  to 
concentrate  in  special  trades,  trade  funds  may  have 
the  additional  advantage  of  racial  homogeneity. 

Moreover,  a  trade  fund  may  often  present  the 
advantage  of  greater  actuarial  equity,  because  the 
rates  of  contribution  may  be  more  easily  adjusted 
to  the  peculiar  rate  of  sickness  (whether  exception- 
ally high  or  low)  within  the  specific  trade. 

ESTABLISHMENT    FUNDS 

These  are  gradually  gaining  popularity.  Under 
present  conditions  of  lack  of  control  they  are  sub- 
ject to  many  abuses,  among  which  perhaps  the  most 
important  are  the  insecurity  of  funds  handled  by  the 
employer,  and  the  arbitrary  administration  by  the 
latter.  But  with  these  conditions  eliminated  there  is 
no  reason  why,  in  large  establishments,  funds  should 
not  offer  a  very  convenient  carrier  for  health  insur- 
ance, provided  their  activity  is  adjusted  at  least  to 


ORGANIZATION  OF  INSURANCE         199 

the  minimum  requirements  of  the  law,  and  their  demo- 
cratic administration  by  the  insured  together  with 
the  employer  is  guaranteed.  Of  course,  under  cer- 
tain conditions  an  establishment  fund  may  present  a 
danger — especially  in  smaller  industrial  communi- 
ties, when  one  establishment  plays  such  a  predomi- 
nant role  in  the  local  industrial  life  that  outside  of 
it  insufficient  material  would  be  left  for  proper 
health-insurance  organization.  Under  such  circum- 
stances the  local  fund  would  practically  be  an  estab- 
lishment fund  and  a  separation  of  forces  would 
scarcely  be  desirable.  The  permission  to  organize 
special  establishment  funds  should,  therefore,  be 
granted  only  subject  to  due  consideration  to  the 
local  situation. 


BENEFIT    SOCIETIES 

Perhaps  the  most  difficult  problem  is  that  pre- 
sented by  the  existing  sick-benefit  societies,  largely 
operated  by  working-men,  but  not  on  trade  or  local 
lines.  The  German  Kranken-  und  Sterbekasse  and 
the  Jewish  Arbeiterring  are  examples  of  these  or- 
ganizations. Often  the  social  and  political  purposes 
of  such  organizations  are  as  important  to  their  mem- 
bership as  the  functions  of  insurance.  Their  member- 
ship is  scattered;  it  is  not  always  limited  to  persons 
who  would  be  subject  to  compulsory  insurance. 
What  shall  be  done  with  them? 

As   participation   in   the   insurance   scheme   car- 


200      STANDARDS  OF  HEALTH  INSURANCE 

ries  with  it  substantial  financial  subsidies,  pressure 
to  admit  these  organizations  may  be  expected.  But, 
as  will  be  explained  later,  the  employer's  subsidy 
must  carry  with  it  his  right  to  participate  in  the 
administration  of  the  health-insurance  fund,  and 
these  voluntary  organizations  are  not  likely  to  meet 
with  favor  any  suggestions  as  to  relinquishing  to  the 
employer  their  present  independence.  This  alone 
would  furnish  many  reasons  for  friction. 

If  these  independent  organizations  are  permitted 
to  enter  the  field  of  compulsory  health  insurance,  on 
terms  of  complete  equality  with  the  compulsory  local 
associations,  a  direct  stimulus  will  be  given  to  them 
for  active  soliciting  of  new  membership,  and  a  selec- 
tion of  risks  will  result  to  the  detriment  of  the  regu- 
lar local  funds.  In  other  words,  a  wedge  would  be 
opened  for  the  British  system  with  all  its  drawbacks. 

It  seems  preferable  to  make  an  effort  to  eliminate 
them  before  they  become  a  stronger  factor  in  health 
insurance  than  they  are  now.  Of  course,  that  does 
not  mean  that  their  existence  must  be  interfered 
with.  But  if  membership  in  one  of  these  organiza- 
tions seems  to  any  worker  preferable  to  that  in  the 
usual  local  funds,  that  may  be  permitted  at  the  cost 
of  forfeiting  the  subsidy  coming  from  the  employer, 
for,  in  addition  to  the  general  considerations  ad- 
vanced above,  the  employers  will  strenuously  object 
to  contributing  money  to  working-men's  organiza- 
tions, without  obtaining  any  right  of  participating 
in  the  management  of  the  fund.  There  seems  to  be 


ORGANIZATION  OF  INSURANCE         201 

no  serious  objection  to  granting  them  the  state 
subsidy,  as  evidence  of  good  faith  on  the  part  of 
the  state,  and  the  absence  of  any  desire  on  the  part 
of  the  state  to  destroy  them,  if  they  can  prove 
sufficient  efficiency  of  management. 

German  experience  shows  that,  notwithstanding 
certain  limitations  imposed  upon  these  sick  benefit 
societies,  a  certain  membership  in  them  will  persist. 
Moreover,  these  strict  conditions  need  not  at  all  pre- 
clude the  activity  or  even  further  development  of  the 
voluntary  societies.  Most  of  them  combine  other 
forms  of  insurance  with  that  against  sickness.  They 
may  still  go  on  with  those  other  forms,  especially 
that  of  life  insurance;  and  the  fact  that  substantial 
health  insurance  will  be  obtained  by  their  members 
through  the  regular  compulsory  system,  at  a  lower 
cost  to  themselves,  will  permit  a  greater  development 
of  life  insurance  than  before.  They  may  also  fur- 
nish additional  insurance  against  sickness  (the  bene- 
fits under  the  compulsory  system  being  necessarily 
limited). 

It  must  be  remembered,  however,  that  the  per- 
sistence of  those  voluntary  sick-aid  societies  creates 
a  certain  danger  of  over-insurance,  a  danger  which 
to  a  certain  extent  exists  even  to-day.  "  Over- 
insurance  "  technically  designates  a  condition  under 
which  the  possible  benefit  at  the  incidence  of  loss  is 
greater  than  the  loss  insured.  Commercial  insur- 
ance wisely  endeavors  to  prevent  over-insurance. 
The  layman  often  experiences  difficulty  in  under- 


202      STANDARDS  OF  HEALTH  INSURANCE 

standing  the  reason  for  this.  Since  larger  insurance 
carries  larger  premium,  he  sees  no  reason  for  control- 
ling the  amount  of  insurance.  But  the  fire-insurance 
man  knows  that  over-insurance  either  demonstrates 
criminal  intent,  or  often  tempts  to  arson,  or  at  least 
gross  carelessness.  The  life-insurance  underwriter 
looks  suspiciously  at  an  insurance  for  an  amount 
out  of  harmony  with  the  applicant's  state  in  so- 
ciety, either  suspecting  that  suicide  is  contemplated 
or  fearing  that  the  over-insurance  itself,  in  face  of 
financial  difficulties,  may  suggest  suicide  as  "  a  way 
out." 

The  temptation  to  fraud  because  of  over-insurance 
is  still  greater  in  case  of  health  insurance,  because 
fraud  may  be  perpetrated  without  criminal  action 
such  as  arson,  and  at  a  much  less  sacrifice  than  sui- 
cide, in  fact  without  any  sacrifice  at  all,  by  sheer 
effort  at  malingering.  The  situation  is  extremely 
unhealthy  when  the  person  is  assured  a  larger  in- 
come when  disabled  than  if  he  returned  to  work. 
Nevertheless,  invariably  our  mutual  sick-benefit  so- 
cieties refuse  to  take  over-insurance  into  considera- 
tion and  permit  the  duplication  (or  even  more)  of 
the  benefits.  The  introduction  of  compensation,  e.g., 
did  not  move  these  societies  to  establish  rules  except- 
ing compensated  accidents  from  the  benefits,  as  they 
should.  The  insured  workmen  also  object  to  being 
thus  "  deprived  of  benefits  for  which  they  paid," 
forgetting  that  thus  they  might  have  reduced  the 
cost  of  insurance  to  themselves.  But  unless  health 


ORGANIZATION  OF  INSURANCE         203 

insurance  is  directly  intended  to  stimulate  valetudi- 
narianism if  not  malingering,  increase  of  benefits 
through  membership  in  voluntary  societies  beyond 
the  full  income  at  most,  (and  preferably  90  per 
cent),  should  be  strictly  prohibited. 


XIII 
ADMINISTRATIVE  ORGANIZATION 

IN  the  preceding  chapter  the  essential  features  of 
the  necessary  insurance  organization  were  outlined. 
The  actual  method  of  administration  of  these  insur- 
ance-carriers (the  choice  being  for  local  associa- 
tions) represents  an  independent  problem. 

The  voluntary  sick-benefit  societies  have  their  own 
administrative  systems,  often  greatly  differing  from 
one  another.  The  same  is  true  of  the  establishment 
funds,  some  of  which  are  altogether  in  the  hands  of 
the  employers.  The  existing  trade  sick-benefit  sys- 
tems are  administered  as  a  part  of  the  trade  union. 
The  local  associations  are  to  be  created  anew.  What 
system  of  administration  should  be  provided  for  these 
new  organizations,  and  how  far  shall  that  of  the 
existing  bodies  be  modified?  Shall  certain  uniformity 
be  established?  Shall  rigid  governmental  control 
prevail?  Or  shall  the  entire  administration  be  placed 
in  the  hands  of  government  officers,  elected  or  ap- 
pointed? It  is  evident  that  many  possibilities  arise. 
What  shall  be  the  guiding  principle  of  selection? 

One  obvious  principle  is  that  of  efficiency.  Com- 
bined with  it  is  that  of  economy.  But  perhaps 
equally  important  is  the  principle  of  democracy  of 
administration. 

204 


ADMINISTRATIVE  ORGANIZATION      205 

The  necessity  for  efficiency  and  economy  scarcely 
requires  any  proof.  But  why  democracy  ?  Unless  out 
of  general  social  considerations?  There  are,  how- 
ever, several  very  pragmatic  considerations  why  the 
principle  of  democracy  cannot  be  disregarded  in  the 
administration  of  such  an  important  social  institu- 
tion as  health  insurance. 

1.  Democracy  is  necessary  for   the  purpose   of 
developing  the  services  of  insurance   to  the  widest 
extent.     Without  democratic  management,  little  be- 
yond   the   prescribed   minimum    of   services    can   be 
expected,  as  the  opposition  to   additional  taxation 
would  be  very  great. 

2.  Democracy  is  necessary   for  the  purpose   of 
preventing  the  development  of  a  tendency  to  malin- 
gering.    The  reason  why  insurance  often  proves  a 
fruitful  source  of  fraud  is  that  even  men  of  average 
honesty  fail  to  recognize  the  element  of  crime  in  im- 
posing upon   an   impersonal   insurance   institution. 
Democratic  management  has  the  tendency  of  plac- 
ing every  member  on  his  honor. 

3.  Democracy  must  stimulate  the  work  of  pre- 
vention.    Not  only  does  the  feeling  of  concern  for 
the  organization  produce  a  salutary  effect  upon  the 
individual,  but  the  effect  is  further  transmitted  from 
one  individual  to  the  other.     A  democratic  institu- 
tion has  a  splendid  opportunity  of  becoming  a  power- 
ful educational  influence  in  the  campaign  for  health 
preservation. 

4.  And  last,  but  not  least,  democratic  manage- 


206      STANDARDS  OF  HEALTH  INSURANCE 

merit  is  almost  a  conditio  sine  qua  non  of  the  intro- 
duction of  the  system  for  the  working  classes  who 
have  already  been  accustomed  to  democratic 
insurance  organizations  and  would  offer  a  very 
obstinate  opposition  to  a  purely  bureaucratic 
organization. 

Of  course,  it  has  been  claimed,  and  frequently  with 
justice,  that  democratic  management  is  often  found 
incompatible  with  the  highest  degree  of  efficiency. 
Not  only  in  commercial  and  industrial,  but  even  in 
political  life,  a  tendency  may  be  observed  to  glorify 
autocratic  administration  as  most  efficient.  It  has 
been  said  with  a  great  deal  of  truth  that  in  the 
proper  harmonizing  of  efficiency  with  democracy  lies 
the  great  secret  of  good  government.  The  general 
solution  of  this  difficult  problem  need  not  be  under- 
taken at  this  place.  It  may  be  readily  admitted 
that,  whatever  the  theory,  in  practice  democracy  usu- 
ally results  in  a  certain  loss  of  momentum  and  effi- 
ciency. 

That  may  well  be  true  as  far  as  certain  aspects 
of  business  administration  are  concerned.  But  as 
against  it,  the  democratic  management  of  a  co- 
operative institution  catering  to  large  numbers  has 
a  tremendous  advantage  of  loyalty  which  must  re- 
sult in  very  great  economy  and  even  efficiency. 

Specifically,  democratic  administration  of  a  mu- 
tual insurance-carrier  presents  the  following  advan- 
tages : 

Cheaper    administration    because    a     democratic 


ADMINISTRATIVE  ORGANIZATION      £07 

form  attracts  the  leaders  of  the  working  class  who 
are  anxious  to  work  for  the  workman's  organization 
out  of  consideration  of  party  loyalty; 

A  very  large  amount  of  free  service  in  the  care  and 
control  of  the  sick,  through  a  system  of  com- 
mittees ; 

A  sense  of  responsibility  on  the  part  of  the 
claimants,  which  minimizes  the  danger  of  malinger- 
ing. 

These  advantages  are  found  in  the  present  mutual- 
aid  societies  and  other  working-men's  organizations 
and  they  explain  the  popularity  and  loyalty  which 
they  create  though  often  suffering  from  inefficient 
financial  management. 

And  last,  but  not  least,  must  be  mentioned  the 
social  aspects  of  democratic  management,  which  have 
an  intrinsic  value  of  their  own. 

The  aim  should  be  to  preserve  these  advantages 
of  democratic  management  as  far  as  possible.  Some 
features  must,  however,  be  abandoned. 

To  begin  with,  it  is  extremely  doubtful  whether 
it  is  possible  (or  even  desirable)  to  leave  these  asso- 
ciations in  the  hands  of  the  working-men  and  women 
alone.  The  employers,  according  to  the  scheme  here 
outlined,1  contribute  an  amount  equal  to  that  of  the 
employees.  Moreover,  the  exact  amount  of  con- 
tribution is  left  undecided  and  depends  upon  the 
efficiency  of  management.  The  employers,  therefore, 
have  a  vital  interest  in  the  finances  of  the  associa- 
1  See  p.  169. 


208      STANDARDS  OF  HEALTH  INSURANCE 

tion.  It  is,  therefore,  idle  to  expect  them  to  forego 
a  voice  in  the  management. 

Nor  would  it  be  desirable.  It  cannot  be  denied 
that  the  employers  have  a  wider  experience  in  mat- 
ters of  financial  administration.  Again  the  reduc- 
tion of  the  sick  rate  depends  upon  the  sanitation  in 
the  factory  and  shop,  which  may  be  carefully  pre- 
scribed by  laws  and  regulations,  but  can  never 
escape  the  influence  of  the  employer's  direct  concern 
in  the  health  of  his  employees.  The  employers'  par- 
ticipation in  the  affairs  of  the  health-insurance  asso- 
ciation should  on  the  whole  be  a  salutary  one. 

Since  the  contributions  of  the  employers  and  em- 
ployees are  equal,  it  seems  the  fairest  way  to  give  the 
two  sides  equal  representation  in  the  administration. 
It  is  true  that  we  are  confronted  with  the  German 
precedent,  which  gives  the  wage-worker  two-thirds  of 
the  voting  power,  and  that  power  is  frequently  re- 
sented by  the  employer  and  jealously  guarded  by  the 
employees.  But  it  must  also  be  remembered  that  the 
German  working-man  contributes  two-thirds  of  the 
cost,  so  that  voting  strength  in  the  administration  is 
proportionate  to  the  contribution,  which  is  the  plan 
outlined  here.  It  is  reported  that  the  radical  ele- 
ments of  the  German  working  class  rather  feared  a 
reduction  of  the  working-man's  contribution,  because 
it  would  have  carried  with  it  reduction  in  the 
working-man's  influence  over  the  affairs  of  the  insur- 
ance association.  But  the  price  of  this  pre- 
ponderance in  the  voting  power  seems  to  be  a 


ADMINISTRATIVE  ORGANIZATION      209 

somewhat  excessive  one.  If  the  activity  of  these  as- 
sociations is  strictly  limited  to  the  functions  pre- 
scribed by  the  law,  some  disagreements  may  be 
expected,  but  there  appears  no  necessity  for  excessive 
friction.  Of  course,  strict  accountability  to  state 
authorities,  and  a  right  of  appeal  against  unjust  acts 
should  be  carefully  guaranteed. 

On  the  whole  it  seems  more  desirable  that  no  offi- 
cial representatives  of  the  state  authority  be  directly 
concerned  in  the  administration  of  these  associations, 
since  this  would  present  the  danger  of  saddling  the 
system  with  a  large  number  of  unnecessary  employ- 
ees, or  on  the  other  hand,  might  result  in  the  state 
officer,  as  the  carrier  of  the  balance  of  power,  cen- 
tralizing under  himself  the  entire  management  of 
affairs. 

There  seems  to  be  no  necessity  of  making  the  de- 
tails of  organization  and  administration  absolutely 
uniform  for  all  associations,  in  view  of  the  many 
racial  and  local  differences.  Only  the  general  out- 
lines may  be  embodied  in  the  law  and  need  to  be 
discussed  here.  Each  association  must  necessarily 
have  its  own  constitution  and  by-laws.  A  require- 
ment that  these  constitutions  and  bylaws  should  be 
subject  to  approval  of  the  central  administrative 
authority  would  appear  to  be  a  sufficient  guarantee 
of  uniformity  in  the  essential  features.  The  equilib- 
rium between  the  employers  and  employees  must  be 
achieved  in  a  small  body  acting,  whatever  its  offi- 
cial designation,  as  the  highest  administrative 


210      STANDARDS  OF  HEALTH  INSURANCE 

authority  of  the  association.  Since,  however,  there 
must  be  a  substantial  difference  between  the  number 
of  employers  and  employees,  either  group  must  con- 
duct its  election  independently.  This  administrative 
body  (executive  committee  or  board)  may  act  either 
through  its  own  officers,  or,  in  larger  associations, 
through  hired  administrative  officials.  In  addition, 
however,  since  the  associations  planned  are  of  sub- 
stantial size,  and  general  meetings  may  be  difficult  or 
useless,  a  representative  body  of  large  size,  control- 
ling the  actions  of  the  administrative  committee,  may 
be  desirable.  In  all  these  representative  bodies  the 
two  sides  may  vote  separately,  and  a  majority  vote 
of  either  side  may  be  required  if  the  problem  con- 
cerns the  general  policies  of  the  association,  such  as 
the  voluntary  increase  of  benefits. 

CENTRAL   ORGANIZATION 

What  has  been  said  above  refers  primarily  to  the 
organization  of  the  local  insurance-carrier.  This, 
however,  must  be  an  organic  part  of  the  entire  sys- 
tem. 

Constitutional  difficulties  will  probably  make  any 
national  system  of  health,  or  any  other  form  of 
social  insurance,  impossible  for  many  years.  If 
progress  is  to  be  made  in  the  near  future,  it  must 
be,  as  it  was  in  the  case  of  compensation,  on  state 
lines.  The  brief  experience  with  compensation  has 
already  indicated  the  main  conditions  of  success  of 


ADMINISTRATIVE  ORGANIZATION      211 

such  social  legislation.  If  special  administrative 
commissions  with  wide  judicial  and  even  semi-legis- 
lative powers  delegated  to  them  were  found  necessary 
for  the  successful  administration  of  compensation, 
similar  commissions  will  be  needed  for  health  insur- 
ance. Nor  does  there  seem  indicated  a  combination 
of  both  branches  of  insurance  in  one  commission,  ex- 
cept perhaps  in  the  smaller  states.  Quantitatively 
the  problem  of  health  insurance  is  the  larger  of  the 
two.  The  proper  launching  of  the  system,  the  rela- 
tions of  individual  members  to  the  funds,  the  prob- 
lems between  the  employer  and  employee,  between 
employer  and  fund,  between  funds  and  the  medical 
profession,  between  the  funds  and  the  state,  the 
proper  regulation  of  membership  rates,  the  organiza- 
tion and  the  regulation  of  medical  service,  etc. — 
these  are  some  of  the  problems  that  must  be  handled 
judiciously  and  expeditiously,  as  can  only  be  done 
successfully  by  an  efficient  commission. 

There  have,  however,  recently  developed  two  defi- 
nite tendencies  in  American  state  government  which 
are  urged  against  this  suggestion,  of  a  special  health- 
insurance  commission.  One  is  a  "  reaction  against 
special  commissions,"  and  another  a  somewhat  ex- 
aggerated enthusiasm  for  industrial  commissions 
for  administration  of  all  labor  legislation.  Because 
of  these  two  tendencies  it  is  urged  that  the 
administration  of  the  health-insurance  system  be 
placed  within  the  industrial  commission  where  one 
exists,  or  within  the  labor  department. 


212      STANDARDS  OF  HEALTH  INSURANCE 

No  very  serious  question  of  principle  is  involved 
in  either  of  these  suggestions,  and  perhaps  it  is 
scarcely  worth  while  entering  here  into  detailed  dis- 
cussion of  the  general  tendencies  of  administrative 
practices  in  the  United  States. 

Proper  administration  of  laws,  especially  con- 
structive laws,  requires  efficient  administrative  or- 
ganization. The  complexities  of  a  compulsory 
health-insurance  system  are  such  that  surely  auto- 
cratic administration  through  one  all  powerful  offi- 
cial is  not  desirable.  The  problems  which  will  re^ 
quire  decision  will  largely  be  problems  of  conflict  of 
interest  which  should  not  be  left  for  final  decision 
to  one  individual,  overburdened  at  the  same  time 
with  executive  details. 

If  the  principle  of  a  special  board  or  commission 
is  recognized  the  question  whether  it  is  organized 
altogether  independently  or  within  a  larger  indus- 
trial commission  is  of  minor  importance.  But  it  is  of 
importance  to  recognize  that  a  complex  health-insur- 
ance organization,  with  its  health  preservation  work 
as  a  side  issue,  cannot  be  sufficiently  managed  by 
men  who  at  the  same  time  are  expected  to  render 
decisions  on  accident  compensation,  industrial  safety, 
arbitration  of  strikes,  and  other  matters. 

"  Industrial  commissions  "  as  such  have  recently 
become  popular  among  students  of  administration. 
But  neither  names  nor  forms  of  organization  offer  a 
sufficient  guarantee  of  efficient  administration,  which 
must  depend  upon  honesty  and  efficiency  of  men. 


ADMINISTRATIVE  ORGANIZATION      213 

Of  the  existing  industrial  commissions  some  have  un- 
doubtedly proved  very  effective.  But  no  one  could 
claim  that  uniformly  the  selection  of  the  men  was 
proper,  nor  that  they  all  have  been  equally  success- 
ful. Especially  strong  is  the  evidence  becoming  that 
most  of  them  successfully  develop  one  or  a  few  of 
their  functions  and  woefully  neglect  others.  If 
efficient  administration  means  administration  by 
experts,  specialized  commissions  offer  a  better  guar- 
antee that  such  experts  will  at  least  gradually  de- 
velop. 


XIV 
FINANCIAL  ORGANIZATION 

AMOUNT  OF   CONTRIBUTIONS 

IN  an  earlier  chapter  certain  definite  rules  were  laid 
down  as  to  the  distribution  of  the  entire  cost,  among 
the  three  main  parties  concerned,  and  these  rules 
were  based  upon  general  social  considerations.  The 
important  technical  problem  remains,  as  to  how  the 
total  amount  shall  be  computed  and  what  it  shall  be. 
Shall  we  endeavor  to  build  up  one  uniform  scale  of 
contributions,  such  as  only  the  British  system,  of  all 
systems,  possesses?  The  amount  of  contributions 
evidently  depends  upon  the  benefits  and  services 
which  must  be  given.  Since  we  have  discarded  the 
British  system  of  uniform  benefits  (for  reasons  al- 
ready discussed  at  sufficient  length),  it  necessarily 
follows  that  uniform  contributions  for  a  varied  scale 
of  benefits  would  not  be  at  all  an  equitable  arrange- 
ment. The  contributions  evidently  should  bear  some 
relation  to  wages,  since  benefits  do.  Yet  all  vexed 
problems  are  not  yet  solved  by  this  decision.  Shall 
the  contributions  then  be  stated  in  terms  of  a  per- 
centage of  wages,  the  same  percentage  for  all  wage 
groups?  Since  only  the  money  benefits  are  adjusted  to 

214 


FINANCIAL  ORGANIZATION  215 

wages,  but  the  entire  medical  service  is  not,  actuarial 
justice  would  require  a  percentage  of  wages  which 
is  increasingly  higher  as  the  wages  become  lower. 

It  is  well  known  that  the  rate  of  sickness  increases 
with  age.  Shall  rates  be  adjusted  to  this  difference 
and  rise  from  year  to  year,  as  would  the  cost  of 
term  life  insurance,  if  taken  out  for  a  1-year  term 
only?  Or  shall  it  increase  from  one  age  group  to 
another,  by  5-  or  10-year  groups,  as  does  the  cost 
of  term  life  insurance  in  actual  practice?  Or  shall 
a  level-premium  system  be  adopted,  familiar  to  Amer- 
icans from  life-insurance  experience,  where  a  uni- 
form premium  is  guaranteed  for  the  entire  period  of 
insurance,  but  varies  with  the  age  at  which  insurance 
is  effected?  This  is  the  British  system,  though  it 
does  not  appear  quite  readily  on  the  surface,  be- 
cause, instead  of  the  contributions  increasing,  the 
benefits  are  reduced  for  all  persons  entering  insur- 
ance at  an  advanced  age  (except  during  a  certain 
period  of  grace). 

A  still  more  important  factor  than  age  in  causa- 
tion of  sickness  is  the  industry  or  occupation.  It 
seems  unnecessary  here  to  prove  this  contention. 
Shall  this  factor  be  disregarded,  as  was  done  in  the 
British  act,  or  taken  cognizance  of  in  establishing 
rates  of  contribution?  Shall  local  differences  be 
taken  into  consideration?  It  is  well  known  that  the 
general  rate  of  sickness  may  be  substantially  influ- 
enced by  climatic  and  general  hygienic  conditions. 
How  far  shall  these  differences  be  taken  into  con- 


216      STANDARDS  OF  HEALTH  INSURANCE 

sideration  in  computing  rates?  And  embracing  all 
these  particular  problems,  there  is  one  general  prob- 
lem— Shall  the  law  contain  any  specific  provisions 
as  to  the  actual  rates  to  be  charged  for  the  insurance 
furnished? 

This  question  must  necessarily  arise  because  of  the 
weight  of  the  British  precedent.  A  study  of  the  his- 
tory of  the  British  insurance  system,  especially  of 
its  preparatory  stages,  emphasizes  the  prominent 
part  taken  by  actuaries  and  their  computations. 
The  wealth  of  actuarial  tables  accompanying  the 
"  Reports  on  the  Administration  of  the  National  In- 
surance Act,"  with  their  complex  mathematical 
formulae,  depresses  and  discourages  the  non-mathe- 
matical student.  Not  only  do  the  general  provisions 
of  the  act,  such  as  the  relation  between  the  contribu- 
tions exacted  and  the  benefits  promised,  depend  upon 
these  computations,  but  a  great  many  minor  features 
as  well,  such  as  those  determining  the  reserve  values 
which  must  be  credited  to  societies  for  the  admission 
of  each  member  over  sixteen  years,  those  for  calcu- 
lating the  rights  of  insured  women  at  marriage,  and 
so  forth. 

It  would  be  unwise  to  tax  the  reader  with  actuarial 
computations  at  this  place.  But  for  the  purpose  of 
an  intelligent  decision  as  to  necessary  legislation 
about  the  rate  of  contributions,  the  essential  actu- 
arial problems  underlying  the  organization  of  health 
insurance  must  be  stated. 

The  entire  science  of  life-insurance  rates  is  based 


FINANCIAL  ORGANIZATION  217 

essentially  upon  two  factors — an  assumed  table  of 
mortality  and  the  laws  of  compound  interest.  The 
conditions  of  the  insurance  contract  are  simple. 
The  payment  of  the  premium  depends  upon  survivor- 
ship, the  payment  of  the  death  benefit  upon  death. 
There  are  no  different  kinds  of  losses.  There  is  of 
course  a  considerable  difference  between  the  rates 
of  mortality  of  different  occupations,  and  of  different 
localities,  but  there  is  seldom  any  adjustment  of 
premiums  to  these  differences.  Moreover,  such  an 
adjustment  would  be  extremely  difficult,  since  a  life- 
insurance  contract  is  a  long-term  contract,  there  is 
no  guarantee  that  the  insured  would  remain  in  the 
same  occupation  he  was  in  at  the  time  of  insurance, 
there  would  be  a  very  great  difficulty  in  controlling 
the  change  of  occupation,  and  the  effort  to  adjust 
rates  to  change  of  occupation  would  not  meet  with 
favor  of  the  insured.  An  insurance  company  oper- 
ates on  a  basis  of  a  certain  mortality  table.  Risks 
are  either  accepted  or  not  accepted.  The  rates  are 
conservative  and  safe,  because  the  mortality  assumed 
from  the  table  exceeds  the  mortality  which  may  be 
safely  expected.  In  a  mutual  company  the  savings 
due  the  difference  in  mortality  may  be  returned  to 
the  insured  as  dividends. 

In  comparison  with  life  insurance,  the  problems 
presented  by  health  insurance  are  extremely  com- 
plex, if  it  is  desired  to  apply  the  strict  rules  of 
actuarial  science.  This  would  be  necessary  if  volun- 
tary long-term  contracts  were  made.  The  arrange- 


218      STANDARDS  OF  HEALTH  INSURANCE 

raent  would  not  be  safe  unless  there  were  a  true  bal- 
ance between  payments  and  the  cost  of  benefit.  The 
difficulties  are  statistical  rather  than  actuarial — i.e., 
the  mathematical  rules  are  available  to  handle  the 
underlying  facts,  but  the  information  as  to  the  facts 
is  very  scanty. 

The  benefits  which  must  be  paid  under  the  system 
are  numerous.  Data  as  to  frequency  of  sickness  and 
non-industrial  accidents,  according  to  the  age  and 
occupation,  would  be  necessary;  also  the  distribu- 
tion of  cases  of  sickness  and  resulting  disability  by 
duration  of  the  case,  according  to  both  age  and 
occupation.  The  valuation  of  the  maternity  benefit 
requires  data  as  to  frequency  of  childbirth  among 
the  women  of  the  wage-working  class.  The  funeral 
benefit,  no  matter  how  small,  raises  all  the  technical 
problems  of  life  insurance.  Finally,  the  broad  plans 
of  medical  and  surgical  aid,  hospital  care,  and  the 
supply  of  drugs  and  appliances  raise  many  questions 
as  to  the  amount  of  aid  which  will  be  necessary  and 
its  probable  cost.  Granted  all  this  necessary  infor- 
mation, it  would  be  possible  to  compute  a  proper 
rate  to  be  charged  at  each  age  of  entry  into  insur- 
ance. But  the  plain  truth  is  that  for  most  of  these 
problems  such  information  is  unavailable  and  may 
remain  unavailable  for  a  long  time,  and  any  actu- 
arial computations  made  are  likely  to  be  very  un- 
certain. 

It  is  true  that  the  work  of  the  British  National 
Insurance  Committee  gives  the  semblance  of  such 


FINANCIAL  ORGANIZATION  219 

accuracy  and  security.  In  the  tables  all  data  are 
carried  out  to  the  third  decimal  place.  But  as  a  mat- 
ter of  fact,  this  accuracy  is  illusory  only.  It  was 
characteristic  of  life-insurance  actuaries  that,  while 
punctilious  care  was  taken  of  all  age  differences, 
occupational  differences  were  disregarded.  Were  all 
the  14,000,000  British  insured  members  of  one  large 
fund,  this  disregard  of  occupational  differences 
might  be  inequitable,  but  would  not  disturb  the  actu- 
arial soundness  of  the  scheme.  But  since  the  thou- 
sands of  approved  societies  are  financially  inde- 
pendent of  one  another,  fluctuations  in  results  be- 
tween the  societies  must  soon  develop.  In  fact,  it  de- 
veloped very  soon  *  that  the  fluctuations  of  sickness 
frequency  are  so  great  as  to  promise  substantial  sur- 
pluses in  some  societies,  and  to  threaten  deficits  and 
bankruptcy  in  others.  While  all  the  government  cal- 
culations were  based  upon  an  actuarial  estimate  of 
1  week's  sickness  per  member  per  annum,  during  the 
very  first  six  months  of  application  of  the  act,  15 
selected  societies  with  a  membership  of  187,000 
showed  together  an  average  sick  rate  of  1.06  weeks; 
but  7  male  societies  showed  fluctuations  in  the  sick 
rate  from  0.68  week  to  1.3  weeks,  societies  with 
mixed  membership  from  0.85  to  1.74  weeks,  and 
female  societies  from  0.58  to  3.15  weeks  per  mem- 
ber per  annum.  Even  larger  fluctuations  of  cost 
were  reported  to  the  Departmental  Committee  on 

1  New  Statesman,  Dec.  6,  1913;  also,  Special  Supplement  to 
issue  of  March  14,  1914. 


220      STANDARDS  OF  HEALTH  INSURANCE 

Sickness  Benefit  Claims  2  and  while  explanations  are 
sought  for  in  the  possible  differences  of  administra- 
tion of  the  act  by  numerous  more  or  less  independent 
societies,  obvious  reasons  are  found  in  the  differ- 
ences of  localities,  age  distribution,  and  occupation. 
Especially  is  the  latter  factor  of  importance.  It  is 
reasonable  to  assume  that  in  the  various  societies 
organized  by  the  Prudential  Insurance  Company  the 
general  administrative  tendencies  are  fairly  uniform. 
Yet,  to  quote  only  one  striking  illustration,  "  in  the 
General  Women's  Society  the  payment  per  member 
per  week  (for  sickness  benefits)  is  3d.,  but  in  the 
Domestic  Servants'  Society  the  cost  falls  to  2d., 
and  in  the  Laundress'  Society  it  rises  to  4<d."  3 

The  unfairness  and  actuarial  complications  aris- 
ing from  uniform  rates  in  view  of  such  differences 
in  experience  are  obvious.  Of  course  triennial  valua- 
tions, provided  for  in  the  law,  furnish  a  means  of 
correction  by  reducing  the  benefits,  but  this  preserva- 
tion of  the  solvency  at  the  expense  of  the  quality  of 
service  is  not  a  very  desirable  situation.  The  point 
of  view  upon  which  the  technical  features  of  the 
British  law  are  based,  that  the  uniformity  of  con- 
tributions is  more  important  than  the  uniformity 
and  efficiency  of  the  benefits  and  service,  is  an  en- 
tirely erroneous  one.  The  practical  result  of  this 

'  See  Report  of  Departmental  Committee  on  Sickness 
Benefit  Claims  under  the  National  Insurance  Act,  1914,  pp. 
17-25. 

•  Report,  p.  21. 


FINANCIAL  ORGANIZATION  221 

will  be  that  the  benefits  prescribed  in  the  law  as  the 
minimum  standard  will  cease  to  be,  as  they  were 
intended  to  be,  the  irreducible  minimum  of  service. 

The  organization  proposed  here  (as  outlined  in  a 
previous  chapter)4  easily  and  automatically  elimi- 
nates many  of  these  problems.  While  full  and  ample 
reserves  are  necessary  for  a  system  of  insurance 
based  upon  voluntary  contracts,  a  compulsory  sys- 
tem may  consciously  adopt  an  assessment  system, 
under  which  the  amount  of  funds  to  be  raised  an- 
nually by  contribution  is  largely  determined  by  the 
amounts  of  money  to  be  paid  out  and  expended  an- 
nually. Since  the  age  distribution  of  the  member- 
ship of  any  large  insurance-carrier  is  not  subject 
to  violent  fluctuations,  the  amount  necessary  is  not 
likely  to  change  very  much  from  year  to  year.  The 
accumulation  and  investment  of  large  reserves  is  alto- 
gether unnecessary.  Insurance  may  be  divorced 
from  savings.  When  the  system  is  thus  simplified, 
the  true  average  cost  may  be  ascertained  in  a  com- 
paratively short  time.  Fluctuations  between  funds 
may  be  looked  upon  with  equanimity  so  long  as  they 
fall  within  certain  reasonable  limits,  whether  owing 
to  differences  in  climatic  conditions  or  to  occupa- 
tional distribution.  It  would  be  expected  as  a  mat- 
ter of  course  that  a  sick  fund  in  a  mining  or  quarry- 
ing community  would  require  more  money  than  a 
large  insurance  fund  for  clerical  employees  only. 

The  first  important  deduction  to  be  derived  from 
*  See  chap,  xii,  pp.  196-203. 


222      STANDARDS  OF  HEALTH  INSURANCE 

these  observations  is  that  it  is  quite  unnecessary, 
and  in  fact  very  dangerous,  to  embody  any  definite 
rate  of  contribution  in  the  act.  This  may  be  safely 
left  to  the  individual  insurance-carriers  to  be  estab- 
lished by  their  by-laws,  subject  to  the  control  of 
the  Commission.  This  is  an  important  negative 
standard.  In  the  first  few  weak  efforts  at  drafting 
health-insurance  bills,  the  error  has  already  been 
committed  of  introducing  an  iron-clad  rate  of  con- 
tribution, sometimes  based  upon  very  fanciful  actu- 
arial reasoning.  It  does  not  follow  therefrom  that 
the  law  may  disregard  the  entire  subject  of  rates  of 
contribution.  The  general  rules  governing  them  may 
well  be  embodied  in  the  act.  We  are  now  better 
prepared  to  reach  definite  conclusions  in  regard  to 
the  many  questions  asked  above. 

UNIFORM     BASES    FOR    COMPUTING    RATES 

Shall  the  contributions  be  at  one  uniform  percent- 
age rate  for  all  wage  groups?  So  far  as  ordinary 
sickness  benefits  are  concerned,  they  are  determined  as 
ratios  of  wages,  so  that  a  uniform  percentage  rate 
is  actuarially  just.  The  cost  of  medical  benefits,  hos- 
pital care,  surgical  supplies,  and  even  of  funeral 
benefits,  does  not  bear  any  proportion  to  wages. 
This  cost  being  a  constant  numerator  in  the  frac- 
tion    of  which  the  denominator  is  vari- 

exposure 

able  (because  of  wage  variations),  this  cost  per  $100 


FINANCIAL  ORGANIZATION  223 

of  wages  will  rise,  as  the  wages  decline.  The  lower- 
paid  wage  groups  of  workers  will  derive  an  advantage 
over  the  higher-wage  groups — a  situation  which  so- 
cially is  much  less  objectionable  than  the  reverse 
would  be,  since  thus  automatically,  by  establishing  a 
simple  rule  of  uniform  percentage  rates,  we  really 
obtain  a  progressive  charge  justified  by  ability  to 

pay. 

The  problem  becomes  somewhat  more  complicated, 
however,  as  far  as  the  employer's  contribution  is 
concerned,  for  his  contribution  would  vary  in  direct 
proportion  to  the  level  of  wages  paid  and  he  thus 
would  be  rather  benefited  than  penalized  for  a  low- 
wage  level.  Of  course  that  offers  an  additional  argu- 
ment for  the  arrangement  suggested  5  for  a  sliding 
scale  of  contribution  for  wages  below  $9;  and  it 
may  be  utilized  for  demanding  that  the  sliding  scale 
be  moved  upward,  possibly  to  $10  or  $12  of  weekly 
earnings. 

It  is  well  to  remember,  however,  that  simplicity 
is  a  great  advantage  in  these  complex  acts  of  social 
legislation,  which  must  be  understood  at  least  in 
their  essential  features  in  order  to  be  popular.  A 
straight  percentage  rate  has  the  advantage  of  sim- 
plicity, especially  so  far  as  the  employer  is  con- 
cerned, who  can  easily  ascertain  the  total  volume  of 
his  pay-roll,  as  he  must  for  the  purposes  of  com- 
pensation insurance.  Moreover,  not  a  small  advan- 
tage is  that  this  total  can  be  easily  and  cheaply 
•  See  p.  173. 


224      STANDARDS  OF  HEALTH  INSURANCE 

audited.  So  far  as  the  contribution  of  the  employee 
is  concerned,  the  easiest  way  to  collect  that  is  to 
permit  the  employer  to  deduct  it  out  of  the  contents 
of  the  pay  envelope.  Here  for  purposes  of  simplicity 
employees  may  be  arranged  into  definite  wage  groups 
with  a  flat  contribution  for  each  wage  group  ap- 
proximating the  stated  percentage  on  an  average. 
For  instance,  let  us  assume  that  according  to  the 
by-laws  of  the  local  insurance  fund  3  per  cent  of 
the  wages  constitute  the  combined  contributions  of 
the  employer  and  employee,  1  1-2  per  cent  represent- 
ing the  share  of  each.  This  will  mean  15  cents 
a  week  for  the  employee  earning  $10  per  week,  and 
18  cents  for  the  one  earning  $12.  It  would  be  mani- 
festly easier  to  establish  a  rate  of  16  cents  for  all 
earning  $10  or  more  but  less  than  $12  per  week 
than  to  compute  the  percentage  separately  for  each 
pay  envelope.  The  possible  combinations  are  nu- 
merous. The  act  need  not  be  lumbered  up  with 
them.  But  the  rule  may  well  be  included  that  the 
funds  may  establish  such  wage  groups  for  purposes 
of  simplifying  the  computation  of  contributions, 
even  if  the  mathematical  accuracy  of  equal  division 
between  employer  and  employed  is  somewhat  dis- 
turbed. 

AGE  AND   RATES  OF  CONTRIBUTION 

The  rate  of  sickness  steadily  increases  with  age. 
But  since  the  ideal  of  true  actuarial  reserves  has 


FINANCIAL  ORGANIZATION  225 

been  dispensed  with,  this  factor  may  be  entirely  dis- 
regarded. As  already  explained,  the  British  con- 
tributions have  been  calculated  at  an  assumed  age 
of  entry  of  sixteen.  Since  the  introduction  of  the 
law  found  persons  at  all  ages,  it  was  necessary  to 
protect  the  financially  independent  societies  by  pro- 
viding "  reserve  values  "  to  compensate  for  the  actu- 
arial loss  sustained  through  a  person  of  higher  age 
joining  and  paying  contributions  at  the  rate  calcu- 
lated for  the  entry  age  of  sixteen.  It  is  not  univer- 
sally recognized  that,  while  the  state  assumes  the 
cost  of  two-ninths  of  the  benefits,  the  same  propor- 
tion must  be  set  aside  for  the  purpose  of  building 
up  the  necessary  reserve;  that,  therefore,  the  entire 
state  contribution  is  virtually  absorbed  into  such 
reserves,  that  this  must  go  on  for  at  least  18  years 
before  the  original  deficit  is  met,  and  that  for  many 
years  this  state  contribution  is  practically  unavail- 
able to  the  insured.  Apologists  of  the  actuarial 
complexities  of  the  British  system  point  to  the  ar- 
tages  of  building  up  these  reserves,  which  by  accumu- 
lating a  compound  interest  will  eventually  save  the 
British  workman  about  Id.  a  week,  because  "  7d. 
paid  in  becomes  8d.  paid  out,"  e  but  it  does  seem  as 
if  this  penny  was  a  scant  compensation  for  18  years 
of  skimping  of  benefits,  which  would  not  have  been 
necessary  if  the  accumulation  of  reserves  were 
abandoned  and  the  state  contribution  made  imme- 
diately available.  Since  the  average  age  contribu- 
•  Carr,  Garnett,  and  Taylor,  National  Insurance,  p.  99. 


2£6      STANDARDS  OF  HEALTH  INSURANCE 

tion  of  a  large  number  of  wage-workers  will  scarcely 
change  from  year  to  year,  the  uniform  contribution 
for  all  ages  will  not  embarrass  the  fund,  and  any 
tendency  to  misstate  the  age,  or  to  discriminate 
against  the  aged,  will  be  eliminated.  Lengthening 
of  the  school  age  and  general  postponement  of  age 
of  entry  into  industry  may  have  a  certain  effect  in 
the  long  run,  but  adjustment  to  all  such  long-range 
changes  may  easily  be  made  when  the  time  arrives. 

OCCUPATION    AND   RATES   OF   CONTRIBUTION 

A  more  important  problem  is  the  effect  of  occu- 
pations upon  the  sickness  rates.  The  problem  has 
been  so  thoroughly  discussed  in  American  literature 
in  connection  with  compensation  insurance  that  the 
justice  of  some  adjustment  will  be  immediately  recog- 
nized. There  is  this  important  difference,  however, 
that  in  compensation  insurance  the  entire  cost  is 
borne  by  the  employer,  or  the  industry,  and  there- 
fore the  responsibility  for  the  hazard  is  placed  where 
it  belongs;  while  in  health  insurance  an  equal  part 
of  the  cost  is  placed  upon  the  employee  who  in  no 
sense  is  responsible  for  the  excessive  morbidity  of  his 
trade. 

A  compulsory  provision  for  adjusting  rates  of 
contribution  to  the  occupational  morbidity  may 
therefore  call  forth  considerable  protest  and  seem 
unwise.  If  a  local  insurance  fund,  democratically 
managed,  is  sufficiently  imbued  with  the  spirit  of 


FINANCIAL  ORGANIZATION  227 

equality  to  establish  one  uniform  rate  of  contribu- 
tion for  all  trades,  it  would  not  seem  to  be  wise  to 
place  insurmountable  obstacles  in  its  way.  On  the 
other  hand,  such  uniformity,  if  it  were  to  be  enforced 
by  the  law,  might  lead  to  some  undesirable  results. 
It  might  stimulate  the  tendency  to  formation  of 
numerous  trade  funds  among  trades  with  lower  rates 
of  morbidity,  so  as  to  enable  them  to  get  all  the 
advantages  of  lower  rates  of  contribution,  and  thus 
interfere  with  the  development  of  large  and  strong 
local  funds,  so  necessary  for  the  efficient  admin- 
istration of  the  medical  benefits.  Insurance-carriers 
must  therefore  be  given  permission  to  grade  their 
rates  of  contribution  according  to  rates  of  morbidity 
as  shown  by  actual  experience,  such  grading  to  be 
subject  to  the  control  of  a  central  administrative 
body,  which  is  in  a  position  to  make  the  necessary 
statistical  and  actuarial  computations. 

EXCESSIVE  HAZAEDS 

A  very  potent  argument  for  such  grading  is  found 
in  its  preventive  possibilities.  Notwithstanding  the 
short  period  of  compensation  in  this  country,  it  has 
become  quite  clear  that  the  high  rate  of  insurance 
may  prove  a  powerful  lever  for  raising  safety  con- 
ditions. This  is  undoubtedly  true  of  general  health 
conditions  as  well.  For  this  reason  such  grading  is 
very  desirable,  especially  in  so  far  as  it  affects  the  in- 
come account  of  the  employer.  This  may  hold  true 


228      STANDARDS  OF  HEALTH  INSURANCE 

of  the  individual  employer  or  establishment  even  more 
than  of  an  entire  branch  of  industry.  Schedule  rat- 
ing on  fire  insurance  is  intended  to  provide  an  indi- 
vidual motive  for  the  improvement  of  the  risk.  For 
the  same  purpose  a  very  comprehensive  system  of 
schedule  and  experience  rating 7  was  introduced  in 
compensation  insurance.  Schedule  rating  for  gen- 
eral health  conditions  may  not  be  a  simple  problem, 
though  it  does  not  appear  at  all  impossible.  But 
some  method  of  penalizing  extra  unsanitary  condi- 
tions resulting  in  excessive  illness  appears  very  de- 
sirable, for  the  sake  of  the  preventive  effect. 

Both  the  German  and  British  acts  contain  pro- 
visions to  that  effect.  According  to  the  new  German 
act,  a  specially  high  rate,  or  even  an  increase  of  the 
share  paid  by  the  employer,  may  be  ordered  for 
an  establishment  suffering  from  excessive  illness. 
Such  measures,  if  permitted  by  the  by-laws  of  the 
fund,  may  be  taken  directly  by  the  executive  powers 
of  the  fund  subject,  of  course,  to  an  appeal  to  the 
supervising  insurance  authorities.  By  similar  pro- 
vision under  the  British  act,  claim  for  losses  sus- 
tained through  excessive  illness  may  be  made,  not  only 

7 "  Schedule  rating  "  is  grading  of  the  insurance  rate,  down- 
ward or  upward,  in  consideration  of  presence  or  absence  of 
certain  safety  devices  or  conditions,  or  on  the  reverse,  for  the 
absence  or  presence  of  hazardous  conditions.  ".Experience 
rating"  is  grading  of  the  insurance  rate  with  regard  to  the 
actual  accident  experience  of  an  establishment.  See  Proceed- 
ings of  Casualty  Actuarial  and  Statistical  Society,  Vol.  I,  No.  3, 
May,  1915. 


FINANCIAL  ORGANIZATION  229 

against  employers,  in  case  of  insanitary  working 
conditions,  but  against  local  authorities,  in  case  of 
bad  housing  conditions,  bad  water  supply,  etc.,  and 
detailed  provisions  are  outlined  as  to  the  proper  pro- 
cedure for  ascertaining  the  amount  of  loss  sustained, 
and  recovering  such  amount.  The  procedure,  how- 
ever, is  cumbersome,  semi-judicial,  and  not  as  likely 
to  produce  the  desired  results  as  the  direct  adminis- 
trative procedure  outlined  by  the  German  law. 

RESERVE    FUNDS 

If  the  theory  of  rate-making  outlined  here  is 
adopted,  the  actual  rates  in  different  insurance- 
carriers  will  be  subject  to  wide  fluctuations,  under 
the  influence  of  differences  climatic,  sanitary,  occu- 
pational, and  in  age  distribution,  and  they  will  also 
depend  upon  the  willingness  of  both  employer  and 
employee  to  extend  the  sphere  of  service  beyond  the 
minimum  limits  prescribed  in  the  law.  It  is  intended 
that  the  rates  therefore  be  experimental,  that  the 
method  of  changing  them  be  simple ;  under  proper 
administrative  control  the  danger  of  financial  em- 
barrassment and  insolvency  need  not  be  serious. 
Further  protection  may  be  demanded  by  the  law  in 
the  nature  of  a  small  reserve  fund,  without  any  in- 
tention of  making  it  actuarially  accurate  and  equal 
to  amount  of  accumulated  liabilities,  for  it  is  not  at 
all  necessary  to  increase  the  burdens  of  the  working- 
man  to-day  for  the  purpose  of  relieving  him  in  the 


230      STANDARDS  OF  HEALTH  INSURANCE 

distant  future  through  the  problematic  income  de- 
rived from  compound  interest.  It  must  not  be  for- 
gotten that  if  the  level  of  prices  continues  to  rise 
and  the  purchasing  value  of  money  therefore  de- 
creases then  the  advantage  of  compound  interest 
may  be  altogether  nullified  by  the  loss  in  the  real 
value  of  these  enforced  accumulations.  A  working 
reserve  sufficient  to  offer  a  sense  of  security  against 
the  possible  effect  of  a  catastrophe  or  epidemic  is 
all  that  is  required.  Such  a  reserve  may  be  slowly 
built  up  by  requiring  a  certain  percentage  of  the 
annual  income  to  be  set  aside  until  an  amount  com- 
mensurate with  the  size  of  the  fund  is  accumulated. 
A  reserve  equal  to  the  total  expenditures  of  the  pre- 
ceding year  would  appear  sufficient. 

LIMITATIONS  AS  TO  EATES 

In  view  of  such  latitude  to  be  allowed  to  the  funds, 
perhaps  no  further  reference  to  the  exact  amounts 
of  the  rates  need  be  made  in  the  law.  It  is  signifi- 
cant, however,  that  the  German  law  establishes  at  least 
some  maximum  limits.  Four  and  one-half  per  cent 
is  the  normal  limit  established,  and  increase  beyond 
this  limit  up  to  6  per  cent  is  permitted  only  for  the 
purpose  of  meeting  the  minimum  benefits.  A  fur- 
ther increase  beyond  6  per  cent  can  take  place  only 
by  concurrent  decision  of  both  employers  and  em- 
ployees. A  little  reflection  will  show  the  necessity 
of  such  limits.  Small  carriers  may  have  an  excessive 


FINANCIAL  ORGANIZATION  231 

expense  ratio  or  may  be  subject  to  violent  fluctua- 
tions of  sickness-insurance  rates.  Exaggerated  local 
pride  may  prevent  necessary  consolidations  of  funds. 
The  wage-workers  are  required  in  Germany  to  carry 
other  burdens  of  social  insurance  besides  health  in- 
surance. A  reasonable  limitation  in  the  act  will 
facilitate  administrative  control. 

As  a  matter  of  fact,  however,  only  in  very  few 
cases  do  these  restrictions  become  necessary,  because 
the  actual  cost  is  very  much  below  these  excessive 
limits.  In  communal  health  insurance,  over  one-half 
of  the  funds  collected  only  1  1-2  per  cent,  about  one- 
fourth  from  1  1-2  to  2  per  cent,  and  the  remaining 
funds  from  2  to  3  per  cent.  In  local  sickness-insur- 
ance funds  and  establishment  funds,  over  one-half 
of  the  funds  collect  from  2  to  3  per  cent,  and  about 
one-third  from  3  to  4  1-2  per  cent.  The  tendency 
has  been  all  along  toward  a  higher  rate  of  contribu- 
tions because  of  the  increase  in  the  cost  of  medical 
aid  and  the  development  of  additional  voluntary  fea- 
tures, but  in  less  than  1  per  cent  of  the  funds  was 
it  necessary  to  raise  the  contribution  above  4 1-2 
per  cent.  With  the  3  per  cent  rate  the  working-man 
in  Germany  pays  2  per  cent;  with  equitable  distri- 
bution his  share  under  the  system  as  outlined  above 
would  not  exceed  1  to  11-2  per  cent  of  his  wages — 
under  a  $10  weekly  wage,  10  or  15  cents  a  week; 
under  a  $15  weekly  wage,  from  15  to  22  cents. 
However,  this  aspect  of  the  problem  will  be  treated 
at  greater  detail  in  a  subsequent  chapter. 


XV 
ORGANIZATION  OF  MEDICAL  AID 

IT  is  impossible,  in  this  brief  outline  of  standards,  to 
devote  much  space  to  consideration  of  administrative 
details.  But  although  the  problem  of  organization 
of  medical  aid  is  distinctly  an  administrative  prob- 
lem, an  exception  must  be  made  in  its  favor,  in  view 
of  its  tremendous  importance,  for  the  successful 
operation  of  the  entire  scheme.  In  almost  all  sys- 
tems of  health  insurance,  medical  aid  is  furnished  in 
kind,  instead  of  by  money  contributions  to  meet  its 
cost,  as  is  done  in  the  American  compensation  prac- 
tice. This  is  necessary  for  considerations  of  both 
economy  and  efficiency.  The  entire  preventive  effect 
of  health  insurance  largely  depends  upon  the  suc- 
cessful organization  of  medical  aid. 

The  most  difficult  problem  during  the  period  of 
organization  of  the  system  in  Great  Britain  and 
the  most  scathing  criticisms  after  its  institution  were 
all  connected  with  the  organization  of  medical  aid. 
The  medical  profession  in  this  country  is  more 
numerous,  better  organized,  and  on  the  whole  wields 
a  greater  influence  than  the  profession  does  in  Great 
Britain.  There  can  be  no  doubt  that  so  soon  as 
health  insurance  leaves  the  domain  of  pure  theory, 

232 


ORGANIZATION  OF  MEDICAL  AID      233 

and  enters  the  legislative  stage,  the  medical  profes- 
sion will  become  very  much  alive  to  the  situation,  and 
will  try  to  influence  legislation  to  suit  its  own  pro- 
fessional views  and  protect  its  own  legitimate  inter- 
ests. It  is  necessary,  therefore,  to  determine  in 
advance  what  form  of  medical  aid  is  desirable  from 
a  broad  social  point  of  view,  and  also  what  part  of 
the  ground  it  may  be  necessary  to  yield  to  the 
established  customs  of  the  varied  elements  of  the 
population  of  the  United  States. 

In  order  to  be  able  to  discuss  intelligently  this 
rather  specialized  problem,  it  is  necessary  to  indi- 
cate briefly  the  essential  problems  of  medical  prac- 
tice, to  which  the  majority  of  American  students  of 
economics  and  social  science  have  as  yet  given  very 
little  thought. 

The  established  form  of  administering  medical  aid 
in  this  country,  so  far  as  paid  service  is  concerned, 
is  through  so-called  "  private  practice."  Medicine 
is  one  of  the  oldest  liberal  professions,  and  private 
practice  for  a  fee  is  the  recognized,  time-honored 
method  of  performing  the  service  in  the  liberal  pro- 
fessions. As  a  matter  of  fact  only  a  few  professions 
have  succeeded  in  preserving  this  system  as  a  pre- 
dominating one.  While  private  practice  for  a  fee  is 
still  the  rule  in  medicine  and  law,  elsewhere  this  has 
given  way  to  the  usual  contract  and  stipulated 
monthly  or  weekly  remuneration.  This  is  largely 
true  of  the  engineering  profession,  the  teaching  pro- 
fession, theology,  most  forms  of  scientific  and  social 


234      STANDARDS  OF  HEALTH  INSURANCE 

investigation,  etc.,  although  in  each  and  every  one 
"  private  practice  "  survives  to  a  limited  extent,  espe- 
cially in  case  of  the  leaders  and  experts,  who  may 
serve  in  a  consulting  capacity. 

The  forces  behind  this  change  are  not  difficult  to 
discover.  Private  practice  gives  way  as  one  large 
employer,  either  individual  or  corporate,  takes  the 
place  of  many  petty  ones.  A  definite  wage  contract 
is  preferable  because  it  is  both  economical  and  more 
efficient.  There  is  a  better  utilization  of  time,  re- 
sulting in  a  smaller  cost  per  unit  of  service,  though 
the  worker's  total  earnings  may  increase.  Besides, 
a  regular  wage  contract  permits  of  assignment  to 
special  duties,  leading  to  division  of  labor  and  spe- 
cialization such  as  is  very  difficult  to  accomplish 
under  a  system  of  private  practice. 

The  public  at  large  is  accustomed  to  private  prac- 
tice as  the  normal  type  so  far  as  the  paid  practice 
of  medicine  is  concerned.  It  has  learned  to  look  to 
institutional  treatment  by  a  staff,  as  a  system 
adapted  only  to  charitable  medical  aid.  The  natural 
consequence  is  to  look  to  private  practice  as  a  more 
satisfactory,  though  more  costly,  form  of  medicine. 
Nevertheless,  even  in  this  country,  the  wage-workers 
of  the  larger  cities  have  sufficiently  demonstrated 
the  economic  feasibility  of  medical  aid  under  some 
systematic  arrangement  between  a  body  of  prospec- 
tive patients  and  the  physician. 

The  first  practical  question  that  must  confront 
the  constructive  social  legislator  in  approaching  this 


ORGANIZATION  OF  MEDICAL  AID      235 

problem  is  this:  Can  medical  aid,  on  the  broad  lines 
indicated  above,  be  given  without  some  change  in 
the  customary  conditions  of  private  practice?  That 
is,  are  these  conditions  fully  adapted  to  the  needs 
and  means  of  the  working  class? 

An  answer  to  this  question  may  be  found  in  the 
present  status  of  medical  aid  to  the  workers.  Be- 
cause private  practice  is  expensive,  even  though  the 
scale  of  fees  for  physicians  practising  among  the 
poor  is  comparatively  low,  medical  aid  is  not  sought 
except  as  a  last  resort.  There  persists  a  harmful 
tendency  to  self-medication,  a  popularity  of  injuri- 
ous nostra,  or  a  plain  neglect  of  chronic  ailments. 
Medical  aid  among  the  poor  is  largely  inefficient.  It 
is  administered  almost  exclusively  by  so-called  "  gen- 
eral practitioners "  or  "  family  physicians,"  often 
Jacks-of-all-trades,  whose  persistence  is  out  of  all 
harmony  with  the  recent  phenomenal  development  of 
scientific  medicine.  There  is  perhaps  a  distance  of 
a  quarter  of  a  century  between  the  present  status 
of  medical  science  and  that  of  medical  practice 
among  the  poor.  Conditions  of  private  practice 
among  the  poor  do  not  offer  an  inducement  to  care- 
ful examination,  to  study,  or  to  the  application  of 
modern  methods.  There  is  no  doubt  that  conditions 
of  dispensary  practice — at  least  in  first-class  public 
dispensaries — are  very  much  superior  because  they 
offer  expert  advice  of  specialists  and  possess  the 
necessary  modern  equipment.  But  dispensary  prac- 
tice is  largely  limited  to  ambulatory  patients,  is 


236      STANDARDS  OF  HEALTH  INSURANCE 

placed  on  a  basis  of  charitable  relief,  and  therefore 
has  serious  drawbacks  of  its  own  kind. 

It  might  be  argued  that  the  creation  of  a  large 
fund  for  the  treatment  and  relief  of  all  workers 
could  improve  these  conditions  without  necessarily 
disturbing  the  underlying  basis  of  private  practice. 
This  is  entirely  conceivable.  To  some  extent  it  is  the 
condition  prevailing  in  the  practice  of  accident  com- 
pensation, since  most  American  acts  impose  upon 
the  employer  (or  the  insurance-carrier)  the  duty  of 
paying  for  the  necessary  medical  aid,  instead  of  re- 
quiring that  such  aid  be  furnished  in  kind. 

But  there  are  very  serious  objections  to  such  a 
system.  The  first  consideration  is  that  of  economy. 
In  compensation  the  cost  is  borne  by  the  employer, 
who  presumably  is  able  to  bear  the  high  cost  of 
medical  aid.  Some  20  to  25  per  cent  of  the  cost  of 
accident  compensation  in  this  country  is  consumed 
in  physicians'  bills.  Yet,  though  the  injured  work- 
men do  not  directly  pay  the  bills,  they  suffer  from 
their  excessive  scale,  because  the  amount  of  medi- 
cal and  surgical  aid  to  be  given  is  entirely  too 
closely  limited  in  most  states,  mainly  out  of  fear  of 
the  excessive  charges  of  private  physicians.  In 
health  insurance  the  workers  themselves  bear  a  large 
share  of  the  burden,  and  strict  economy  is  more 
urgent.  Disorganized  medical  aid  is  uneconomical 
just  because  of  this  lack  of  organization.  Excessive 
cost  of  the  unit  of  service  does  not  at  all  spell  exces- 
sive income  of  the  practitioner  because  private  prac- 


ORGANIZATION  OF  MEDICAL  AID      237 

tice  is  hopelessly  tied  up  with  loss  of  time  for  the 
majority  of  the  practitioners.  The  unsuccessful  ones 
barely  make  a  living,  though  charging  from  $1  to 
$2  for  a  few  minutes  of  work.  The  successful  ones 
must  grow  hurried  and  careless  in  their  work,  since 
their  income  is  in  adverse  proportion  to  the  time  and 
care  they  are  willing  to  give  to  the  patient.  Be- 
sides, the  broad  effect  of  prevention  of  ills  is  almost 
altogether  lacking  in  private  practice;  medical  con- 
trol over  those  who  are  ill,  or  those  who  claim  to  be, 
is  made  very  much  more  difficult;  malingering  is 
directly  stimulated. 

If  some  sort  of  organization  therefore  seems 
clearly  indicated,  the  exact  lines  on  which  it  must 
proceed  are  still  subject  to  many  fluctuations.  Com- 
plete organization  would  presuppose  a  state  of 
affairs  in  which  all  the  medical  work  to  be  done  for 
the  members  of  a  health-insurance  fund  would  be 
done  by  physicians  and  surgeons  (one  or  many,  as 
the  case  may  be)  who  are  specially  employed  for  the 
purpose  and  devote  their  entire  time  to  it,  as  is  the 
case  with  the  internes  in  hospitals  and  in  other  insti- 
tutions. That  is  not  at  all  a  revolutionary  pro- 
posal. It  exists  in  many  industrial  corporations,  it 
is  found  on  a  national  scale  in  the  famous  system  of 
Russian  village  medicine,  and  often  gives  excellent 
results.  It  is  in  use  in  some  German  health-insurance 
funds  and  is  advocated  by  many  experts  on  health 
insurance  and  by  a  goodly  proportion  of  adminis- 
trative officers  of  health  funds. 


238      STANDARDS  OF  HEALTH  INSURANCE 

It  is  sometimes  advocated  even  in  this  country  by 
persons  familiar  with  the  advantages  of  organized 
medical  service  in  the  army  or  navy,  for  instance.  It 
finds  its  support  occasionally  in  the  brilliant  results 
achieved  by  thorough  organization  of  medical  serv- 
ice in  the  building  of  the  Panama  Canal. 

But  this  entire  elimination  of  private  practice 
among  members  of  a  health-insurance  system  has 
raised  very  strong  objections  from  two  sources — 
the  medical  profession  and  the  insured  themselves. 
The  physicians  are  opposed  to  such  complete  or- 
ganization because  they  fear  that  in  it  place  will  be 
found  for  only  a  limited  portion  of  the  profession — 
which  seems  to  be  based  upon  an  assumption  that 
the  medical  profession  is  already  overcrowded.  It  is 
true  that  the  census  indicates  some  150,000  physi- 
cians in  the  United  States  or  1  physician  to  a  popu- 
lation of  some  600.  Yet  it  is  difficult  to  say  whether 
this  proportion  is  excessive.  There  are  many  idle 
physicians,  but  there  are  also  many  overworked  ones, 
and  many  ill  persons  who  do  not  receive  adequate 
medical  aid. 

One  of  the  most  significant  results  of  the  Com- 
munity Sickness  Survey  of  a  middle-sized  city 
undertaken  by  the  Metropolitan  Life  Insurance  Com- 
pany *  was  the  statement  that  only  "  61  per  cent  of 
the  cases  of  sickness  had  a  physician  in  attendance," 

1  Community  Sifknet*  Surrey,  Rochester,  New  York,  Sept., 
1915,  by  Dr.  L.  K.  Frankel  and  Dr.  L.  I.  Dublin.  United 
State*  Public  Health  Report*,  Feb.  25,  1916. 


ORGANIZATION  OF  MEDICAL  AID      239 

and  that  "  only  45.3  per  cent  of  those  sick  but  able 
to  work  had  physicians  in  attendance,"  while, 
"  of  those  both  sick  and  incapacitated  for  work, 
63.8  per  cent  employed  physicians  or  were  being 
treated  in  institutions."  If,  therefore,  nearly  two- 
fifths  of  the  sick  poor  receive  no  medical  aid,  it 
becomes  obvious  that  through  a  system  of  health 
insurance  the  amount  of  medical  aid  to  be  fur- 
nished would  at  once  increase  very  materially. 
Perhaps  a  very  rough  computation  may  be  made 
here  for  purposes  of  illustration  only.  If  the 
average  annual  number  of  sick  days  per  adult 
person  is  about  10,  a  population  of  600  will  give 
some  6,000  days  of  illness,  or  some  20  patients 
per  every  working  day  for  each  physician,  perhaps 
as  many  as  one  should  be  required  to  care  for.  But 
in  every  civilized  community  the  number  of  physi- 
cians required  for  the  work  of  control,  of  investiga- 
tion, of  public  health  and  hygiene  is  growing  fast, 
so  that  the  foregoing  proportion  of  physicians  to 
population  is  probably  higher  than  will  be  found  in 
actual  practice.  It  is  significant  that  while  the 
proportion  of  physicians  to  population  is  higher  in 
the  United  States  than  perhaps  anywhere  else  in 
the  world  it  has  not  increased  during  the  last 
fifty  years,  and  during  the  last  decade,  because 
of  the  raising  of  educational  requirements  for 
the  study  of  medicine,  and  the  consequent  rapid 
reduction  in  the  number  of  medical  schools,  the 
proportion  of  physicians  to  population  in  the 


240      STANDARDS  OF  HEALTH  INSURANCE 

United  States  is  actually  decreasing.  Moreover, 
no  system  of  health  insurance  contemplates  the 
inclusion  of  the  entire  population,  and  among 
the  higher  social  strata  private  practice  with  its 
higher  fees  and  greater  income  and  leisure  for 
the  medical  practitioner  may  still  persist.  Be 
it  as  it  may,  the  interests  of  the  physicians — 
an  important,  powerful,  and  intelligent  element 
of  our  population — cannot  be  disregarded,  espe- 
cially as  regards  those  who  are  already  in  prac- 
tice. If  the  profession,  however,  be  already  over- 
crowded, a  situation  which  would  bring  that  fact  to 
light  and  prevent  excessive  increase  in  the  future  is 
of  itself  not  an  undesirable  one. 

Another  serious  objection  which  is  advanced  by 
the  medical  profession  is  that  complete  organization 
of  medical  practice  would  lower  the  standard  of 
medical  income  and  would  close  the  avenues  for  ad- 
vance to  the  ambitious  members  of  the  class.  This 
argument  can  be  very  readily  disposed  of.  High 
medical  incomes  are  very  few  and  far  between.  They 
are  found  almost  exclusively  among  the  fortunate 
few  who  are  ministering  to  the  ills  of  the  wealthy. 
In  practice  among  the  poor,  large  incomes  can  be 
achieved  only  through  exhaustive  overwork  or  by 
gross  neglect  of  the  interest  of  the  patients.  The 
difficulty  is  that  the  psychology  of  the  medical  man 
has  been  adjusted  to  a  speculative  hope  of  excep- 
tional success,  a  factor  wholly  absent  in  most  other 
liberal  and  scientific  professions,  and  one  which  fre- 


ORGANIZATION  OF  MEDICAL  AID      241 

quently  has  an  injurious  effect  upon  the  entire 
psychology  of  the  profession  and  its  attitude  of  the 
average  physician  to  social  problems. 

FREEDOM  OF  CHOICE  OF  PHYSICIANS 

A  quite  different  line  of  defense  of  private  prac- 
tice is  advanced  by  the  general  public,  namely,  the 
necessity  of  freedom  of  choice  of  physician  because 
of  the  intimate  relation  existing  between  physician 
and  patient  and  the  necessity  of  complete  faith  in  the 
selected  healer  as  a  prerequisite  to  successful  treat- 
ment. That  is  a  force  to  be  reckoned  with.  A 
measure  of  social  amelioration  cannot  be  successful 
if  it  runs  directly  opposite  to  the  wishes  and  senti- 
ments of  the  beneficiaries,  no  matter  how  ill  grounded 
such  sentiments  may  be.  Nevertheless,  in  planning 
for  large  measures  the  effect  of  which  will  mainly 
manifest  itself  in  long-range  changes,  it  is  proper 
not  to  accept  these  wishes  and  sentiments  as  final 
and  conclusive.  Of  course  the  advantages  of  such 
freedom  of  choice  are  often  imaginative  or  even 
illusory.  Moreover,  social  and  economic  conditions 
have  already  abolished  free  choice  in  a  great  many 
instances.  It  does  not  exist  in  thousands  of  smaller 
communities  where  there  is  no  choice.  It  is  not  ex- 
pected in  hospitals  and  dispensaries  to  which  literally 
millions  of  workers  and  their  families,  apply  for 
medical  aid.  It  is  but  seldom  exercised  in  regard  to 
selection  of  specialists  when  the  suggestions  of  the 


242      STANDARDS  OF  HEALTH  INSURANCE 

family  physicians  are  accepted.  It  is  waived,  so  far 
as  the  individual  members  are  concerned,  in  a  large 
number  of  fraternal  lodges,  after  the  selection  of  the 
physician  has  been  effected  by  a  democratic  vote. 

Scientifically,  the  advantages  of  a  free  choice  are 
open  to  criticism.  They  may  have  been  great  so  long 
as  the  function  of  a  physician  was  exercised  largely 
by  moral  suasion.  But  scientific  diagnosis,  sero- 
therapy, and  skilful  surgery  do  not  depend  for  their 
success  upon  such  whimsical  considerations.  In 
large  industrial  communities  the  poetic  "  country 
doctor,"  who  took  care  of  several  generations,  has 
long  since  given  way  to  the  modern  commercialized 
practitioner.  It  is  preposterous  to  imagine  that  the 
average  working-man  or  woman,  altogether  ignorant 
of  even  the  elements  of  physiology  and  hygiene,  is 
able  to  pass  intelligent  judgment  upon  the  profes- 
sional accomplishment  of  his  physicians.  But  be- 
cause professional  success  sometimes  depends  much 
more  upon  the  physician's  reputation  in  the  commu- 
nity than  upon  his  professional  standing  among  his 
colleagues,  the  free  choice  of  physician  is  often  de- 
fended because  it  represents  a  valuable  asset,  com- 
parable to  the  "  good  will "  of  commercial  under- 
takings. The  constructive  legislator,  therefore,  need 
not  perhaps  be  intimidated  by  the  intrinsic  value  of 
free  choice,  but  he  must  reckon  with  it  as  a  social 
force  which  cannot  be  antagonized  too  strenuously, 
since  the  success  of  the  whole  plan  of  health  insurance 
is  involved. 


ORGANIZATION  OF   MEDICAL  AID      243 

The  practical  conclusion,  therefore,  seems  to  be 
that  medical  organization  is  to  be  aimed  at  so  far  as 
conditions  will  permit,  but  that  in  deference  to  ex- 
isting conditions  certain  freedom  of  choice  among 
physicians  must  be  provided  for.  But  shall  this  free- 
dom of  choice  be  limited  to  the  physicians  who  have 
entered  into  a  contractual  relation  with  the  fund,  or 
shall  it  be  extended  to  the  practitioners  of  medicine 
generally?  European  experience  offers  a  variety  of 
expedients.  In  Denmark,  the  law  does  not  under- 
take to  regulate  the  conditions  of  medical  aid.  In 
practice,  all  forms  are  found,  from  assignments  of 
physicians  to  definite  districts,  to  freedom  of  choice 
of  any  physician.  Yet  the  last  method  is  rare,  and 
the  prevailing  method  is  either  the  designation  of  a 
district  physician,  or  the  right  of  choice  between  a 
limited  number  of  physicians  employed  by  the  fund. 
In  Germany,  the  recent  law  of  1911  demands  the 
freedom  of  choice  between  at  least  two  physicians 
"  if  it  does  not  add  excessively  to  the  cost,"  with 
the  important  limitation  that  all  medical  aid  must  be 
furnished  by  physicians  under  contract.  Here,  also, 
practice  has  created  both  types,  while  the  question  of 
comparative  advantages  of  the  physician  employed 
outright  and  selection  from  a  large  list  of  physicians 
still  remains  one  of  the  mooted  questions  in  the  prac- 
tice of  German  social  insurance. 

The  question  of  local  option  in  regard  to  organiza- 
tion of  medical  aid  has  been  approached  by  the  Brit- 
ish Health  Insurance  act  in  an  entirely  different 


244      STANDARDS  OF  HEALTH  INSURANCE 

spirit.  The  national  act  prescribes  a  system  which 
is  practically  uniform  throughout  the  land.  The 
system  was  decided  upon  as  a  compromise  after  a 
stormy  conflict  with  the  medical  profession.  The 
resulting  system  of  "  medical  panels  "  (or  registered 
lists  of  physicians)  grants  the  right  to  practise 
among  the  insured  for  a  stipulated  annual  amount 
to  each  reputable  physician.  The  right  to  practise 
among  a  certain  class  of  population  is  there- 
fore recognized  as  a  vested  right  of  the  pro- 
fession and  of  all  the  members  of  the  medical 
profession. 

Sufficient  evidence  has  already  accumulated  to 
prove  that  the  British  system  does  not  work  out 
well  in  many  particulars  as  far  as  the  treatment  of 
disease  is  concerned.  It  has  left  the  entire  choice  in 
the  hands  of  the  individual  workman,  and  preserved 
the  economic  dependence  of  the  physician  upon  the 
good  will  of  his  clients.  It  has  placed  no  limits 
upon  the  number  of  insured  patients  a  physician  may 
have,  and  has  therefore  stimulated  low-grade  com- 
petition among  physicians  for  the  capture  of  the 
largest  possible  number  of  contract  clients.  It  has 
limited  the  insured  practically  to  one  physician,  and 
made  treatment  by  specialists  unavailable.  In  short, 
though  it  has  increased  largely  the  amount  of  medi- 
cal advice  given,  it  has  not  succeeded  in  improving 
its  quality.  Cases  are  reported  in  the  Fabian  re- 
port of  physicians  who  have  as  many  as  9,000  in- 
sured on  their  lists  and  who  are  forced  to  hire  one 


ORGANIZATION  OF  MEDICAL  AID      245 

or  more  assistants  in  order  to  give  them  even  the 
most  superficial  treatment. 

There  is  very  important  warning  in  the  English 
conditions  of  what  the  worst  abuses  are,  which  must 
be  carefully  avoided.  Any  one  who  is  somewhat 
familiar  with  the  conditions  of  medical  education  and 
the  legal  requirements  for  practice  in  this  country 
knows  that  variations  between  the  highest  and  lowest 
standards  are  such  that  in  some  states  neither  a 
medical  diploma  nor  a  state  license  is  a  sufficient 
guaranty  of  efficiency.  There  is  absolutely  no  rea- 
son why  a  health-insurance  institution,  with  the 
means  at  its  disposal,  should  renounce  the  right  to 
intelligent  selection  of  its  medical  practitioners  ac- 
cording to  standards  established  by  competent  au- 
thorities. There  is  no  reason  why  it  should  permit 
the  commercial  spirit  of  some  practitioners  to  inter- 
fere with  the  efficiency  of  the  campaign  of  health 
preservation  which  in  the  long  run  will  be  the  most 
important  aspect  of  the  insurance  system. 

Yet  it  is  quite  evident  that  no  organization  of 
medical  aid  can  be  effective  from  the  point  of  view 
of  public  health,  in  which  the  legitimate  interests  of 
the  medical  profession  are  not  taken  into  due  con- 
sideration. It  is  not  only  that  a  certain  amount  of 
good  will  between  the  physician  and  patient  is  after 
all  essential  to  successful  practice  of  the  medical 
art,  but  that  the  development  of  medical  science  and 
its  successful  application  by  skilful  hands  is  impos- 
sible without  a  fairly  prosperous,  satisfied  medical 


246      STANDARDS  OF  HEALTH  INSURANCE 

profession.  This  does  not  contemplate  the  phe- 
nomenal incomes  made  by  the  fortunate  few.  But 
while  exact  information  as  to  the  economic  status 
of  the  medical  profession  in  this  country  is  lacking, 
the  very  fact  that  statements  as  to  the  average  in- 
come of  physicians,  varying  from  $600  to  $1,200, 
are  frequently  mentioned  and  accepted  with  credulity 
seems  to  indicate  an  unsatisfactory  condition  for 
many.2  Evidently  satisfactory  progress  of  medical 
science  and  the  art  of  medical  practice  cannot  be 
built  upon  such  an  economic  basis.  A  prosperous, 
rich  people  is  entitled  to  a  medical  profession  suffi- 
ciently relieved  of  the  struggle  for  existence,  to  be 
able  to  command  some  leisure  from  work,  and  to  de- 
vote part  of  that  leisure  to  its  own  development. 
For  medical  science  is  at  present  perhaps  on  the 
height  of  its  development,  and  no  amount  of  school 
education  alone  can  long  keep  the  practising  phy- 
sician abreast  of  the  times  unless  supplemented  by 
continuous  study  of  the  results  of  scientific  advance. 
The  proper  organization  of  medical  aid  is,  there- 
fore, closely  connected  with  the  complicated  prob- 
lem of  remuneration  for  medical  work.  It  is  charged 
by  many,  for  instance,  that  the  shortcomings  of  the 
British  system,  repeatedly  referred  to  above,  depend 
largely  upon  the  unsatisfactory  provisions  for  pay- 

1  The  Social  Insurance  Bureau  recently  established  by  the 
American  Medical  Association,  the  work  of  which  is  in  charge 
of  the  writer,  contemplates  collection  of  accurate  data  on  this 
subject. 


ORGANIZATION  OF  MEDICAL  AID      247 

ment  to  doctors.  It  is  true  that  the  question  of  rate 
of  payments  to  physicians  was  the  cause  of  serious 
contention  between  the  central  authorities  of  the 
national  health-insurance  system  and  the  organized 
medical  profession  in  Great  Britain,3  and  that  in 
various  German  cities  it  has  led  to  serious  conflict 
between  the  insurance  funds  and  the  physicians,  often 
accompanied  by  the  so-called  "  doctors'  strikes,"  4  of 
which  as  many  as  1,022  were  recorded  up  to  1911, 
with  921  decided  in  favor  of  the  doctors.  This  re- 
sult alone  would  indicate  that  usually  the  medical 
profession  had  real  grievances  to  contend  with. 

There  is  reason  to  believe,  however,  that  the  finan- 
cial organization  as  here  outlined  is  much  more 
favorable  to  the  prevention  of  such  unseemly  con- 
flicts. In  Great  Britain  the  iron-clad  system  of 
contributions,  definitely  fixed  in  the  law,  made  a  more 
liberal  treatment  of  the  physicians  a  problem  of  great 
financial  complexity.  In  Germany  the  parsimonious 
attitude  of  the  working-men  to  their  doctors  may  be 
easily  explained  by  the  fact  that  these  wage-workers 
contribute  66  2-3  per  cent  of  the  total  cost,  and 
therefore  are  jealous  of  every  increase  of  expendi- 
tures. But  under  the  plan  here  outlined  the  wage- 
workers  would  be  financially  responsible  for  only  40 
per  cent  of  any  increase  in  the  cost  of  medical  aid. 

•See  "Report  for  1912-13  on  the  Administration  of  the 
National  Insurance  Act,"  Part  I  (Health  Insurance),  pp. 
124-58. 

4  See  I.  G.  Gibbon's  Medical  Benefit,  especially  pp.  227-46. 


*48      STANDARDS  OF  HEALTH  INSURANCE 

As  is  shown  in  the  following  chapter,  the  average 
cost  is  computed  at  3  to  4  per  cent  of  the  wages, 
of  which  some  1  per  cent  to  1.5  per  cent  will  repre- 
sent the  cost  of  medical  aid,  if  the  Leipzig  basis  is 
assumed.  Supposing  extreme  liberality  were  dis- 
played to  the  medical  profession,  an  increase  of  the 
cost  by  some  50  per  cent  or  to  1.5  per  cent  or  2.25 
per  cent  of  the  wages  would  probably  be  the  extreme 
outside  limit  of  this  result.  The  additional  .5  to  .75 
per  cent  of  the  wages  would  represent  as  far  as  the 
employee  is  concerned  from  .2  to  .3  per  cent  of 
wages,  or,  with  an  average  wage  of  $600,  from  $1.20 
to  $1.50  a  year.  Even  for  the  worker  with  earnings 
of  $1,000  the  excess  would  be  about  $2  to  $3  per 
annum.  Surely  an  efficient  medical  service  is  worth 
this  additional  charge.  It  is  impossible  to  go  into 
the  details  of  this  problem  at  this  place.5 

A  great  many  different  plans  are  operative  in  Eu- 
rope. The  simplest  method  is  that  of  exclusive  em- 
ployment at  a  stipulated  annual  salary.  At  the  other 
extreme  is  a  scale  of  definite  fees  for  visits,  operations, 
and  all  other  forms  of  medical  service.  The  British 
system  has  adopted  the  capitation  plan,  which  repre- 
sents a  sort  of  crude  insurance  contract  between 
physician  and  insured,  since  the  former  agrees  to 
furnish  all  medical  aid  throughout  an  entire  year 
for  a  small  consideration.  It  would  seem  to  be  very 
much  wiser  if  this  function  of  insurance  were  lodged 

•Perhaps  the  best  discussion  of  this  may  be  found  in  Medi- 
cal Benefit  t»  Germany  and  Denmark,  by  I.  G.  Gibbon. 


ORGANIZATION  OF  MEDICAL  AID      249 

in  a  fund  rather  than  in  an  individual  physician 
whose  remuneration,  unless  on  a  salary  basis,  were 
better  adjusted  in  some  proportion  to  the  service 
rendered.  Yet  since  the  measure  of  the  necessary 
service  remains  largely  with  the  physician,  a  fee 
schedule,  no  matter  how  moderate,  offers  a  constant 
temptation  to  excessive  visits  and  bills.  To  counter- 
act this  tendency  different  schemes  have  been  tried 
out  in  different  funds.  In  Leipzig,  e.g.,  a  definite 
per  capita  charge  is  assigned  to  the  entire  body  of 
physicians  in  a  panel,  to  be  distributed  among  them 
in  proportion  to  the  work  done,  which  creates  among 
the  physicians  themselves  a  controlling  force  to  pre- 
vent any  one  from  claiming  an  excessive  share.  The 
whole  problem  may  be  said  to  be  still  in  the  experi- 
mental stage,  and  there  is  no  necessity  to  embody 
iron-clad  rules  into  the  law,  or  to  make  them  uniform 
for  the  entire  state.  So  long  as  the  central  authority 
is  given  sufficient  power  to  control  the  situation,  time 
may  be  depended  upon  to  bring  out  the  best  methods 
adapted  to  any  community.  The  aim  to  be  empha- 
sized in  the  law  is  the  quality  of  the  service,  rather 
than  the  details  of  remuneration,  which,  in  the  be- 
ginning at  least,  may  be  left  to  the  combined  efforts 
of  collective  bargaining  and  government  regulation.' 
Discussing,  as  we  are  here,  broad  legislative 
standards,  rather  than  details  of  actual  administra- 

•  An  authoritative  discussion  of  this  question  by  Dr.  Alex- 
ander Lambert,  of  New  York  City,  will  be  found  in  Appendix 
2,  p.  295. 


250      STANDARDS  OF  HEALTH  INSURANCE 

tion,  the  same  rule  would  seem  to  hold  in  regard  to 
the  entire  problem  of  organization  of  medical  aid, 
especially  if  these  standards  are  intended  for  the 
country  at  large  rather  than  one  specific  state.  The 
Mills  Bill  introduced  in  New  York,  and  the  identical 
bills  of  the  American  Association  for  Labor  Legisla- 
tion introduced  in  other  eastern  states,  was  severely 
criticised  by  some  physicians  because  the  drafters 
failed  to  work  out  all  these  details  and  embody  them 
in  the  law.7  The  omission,  however,  was  intentional 
and  based  upon  these  considerations : 

First,  no  one  knows  what  the  most  acceptable 
form  of  organization  both  for  the  physicians  and 
patients  would  be,  and  principles  once  embodied  in 
the  language  of  the  law  are  not  easily  changed. 

Second,  it  is  extremely  doubtful  whether  the  estab- 
lishment of  one  uniform  iron-clad  system  is  at  all 
desirable.  Even  among  the  physicians  an  extreme 
divergence  of  opinion  exists. 

It  would  seem  very  much  better  to  leave  a  good 
deal  of  latitude,  especially  in  the  beginning,  so  that 
various  plans  may  be  simultaneously  adopted  and 
tried  out. 


ORGANIZATION     OF    DRUG    SUPPLY 

In  the  organization  of  the  distribution  of  medical 
and  surgical  supplies  and  other  apparatus  parallel 

T  See  especially  Medical  Economist  for  March,  1916,  VoL  IV, 
No.  3,  p.  59. 


ORGANIZATION  OF  MEDICAL  AID      251 

problems  may  arise,  but  they  appear  to  be  very  much 
less  complicated.  With  the  exception  of  drugs 
to  be  specially  compounded,  we  are  dealing  here 
with  well-standardized  articles  of  commerce  which 
can  readily  be  bought  in  the  open  market.  The 
problem  is  analogous  to  that  of  the  consumers' 
co-operative  movement,  whose  very  soul  is  wholesale 
purchasing  and  elimination  of  the  middleman's 
profits.  There  is  a  very  potent  argument,  therefore, 
for  direct  distribution  of  such  supplies,  at  least  by 
the  larger  health-insurance  funds.  The  compound- 
ing of  prescriptions,  however,  has  become  a  recog- 
nized profession  and  as  such  it  succeeds  in  wielding 
a  definite  social  influence.  From  this  there  has  re- 
sulted a  curious  pressure  for  freedom  of  choice  of 
druggists,  as  if  drugs,  like  medical  advice,  depended 
for  their  efficacy  upon  personal  confidence  of  the 
consumer. 

The  one  serious  difficulty  about  direct  assumption 
of  the  drug  and  supply  business  by  the  sickness- 
insurance  carrier  is  the  local  character  of  the  drug- 
gist's trade  and  the  necessity  for  emergency  service, 
which  in  large  cities  may  make  central  distributing 
stations  somewhat  inconvenient.  In  Germany  the 
peculiar  laws  in  regard  to  the  licensing  of  druggists 
and  drug-stores  have  strengthened  their  position  to 
such  an  extent  that  the  new  act  of  1911  practically 
guarantees  them  their  vested  interests  in  the  business, 
with  freedom  of  choice,  and  the  funds  may  make 
contracts  only  for  the  limitation  of  charges.  In 


252      STANDARDS  OF  HEALTH  INSURANCE 

Great  Britain  the  consideration  for  the  economic 
interests  of  the  pharmaceutical  profession  went  even 
farther,  so  that  druggists'  panels  were  established 
by  the  insurance  commissioners  practically  on  their 
own  initiative.  The  complicated  English  arrange- 
ments may  be  justified  by  the  fact  that  the  societies 
are  not  organized  in  territorial  limits,  and  their  ter- 
ritories overlap,  but  where  geographically  limited 
funds  prevail,  the  methods  of  drug  distribution  can 
be  materially  simplified.  The  health-insurance  act 
may  well  require  all  large  funds,  with  over  a  certain 
membership,  to  establish  a  direct  supply  of  all  thera- 
peutic and  surgical  materials,  with  the  exception  of 
emergency  prescriptions.  It  must,  at  least,  not  con- 
tain any  provision  which  will  prevent  the  develop- 
ment of  such  co-operative  initiative.  Through  such 
economical  administration,  all  arguments  against  the 
supply  of  rare  and  expensive  drugs  or  apparatus 
may  be  answered. 

ADMINISTRATION   OF  INSTITUTIONAL  TREATMENT 

So  far  as  institutional  treatment  is  concerned, 
definite  rules  in  the  law  would  appear  premature. 
Undoubtedly  the  goal  to  strive  for  is  the  upbuilding 
of  special  hospitals,  sanatoria,  and  similar  institu- 
tions by  the  health-insurance  funds,  wherever  real 
need  for  such  additional  facilities  exists.  All  this, 
however,  will  require  accumulation  of  both  the  neces- 
sary funds  and  experience.  Contractual  agree- 


ORGANIZATION  OF  MEDICAL  AID      253 

ments — also  under  the  control  of  the  insurance  com- 
mission— will  be  the  predominating  method  in  the 
beginning.  The  appearance  of  a  large  body  of  pay- 
ing hospital  patients  will  stimulate  the  development 
of  both  private  and  public  institutions.  A  sufficient 
period  of  time  for  the  necessary  transitional  stage 
must  be  allowed,  but  eventually  a  certain  number  of 
beds  in  proportion  to  the  number  of  insured  must  be 
demanded  by  the  law.  In  combination  with  private 
benevolence  and  public  health  service  the  growth  of 
hospital  facilities  must  be  developed  until  institu- 
tional treatment  for  all  cases  requiring  it  will  become 
a  matter  of  course. 

Since  the  advantages  of  institutional  treatment 
for  certain  cases  are  well  recognized,  at  least  in  the 
more  civilized  communities,  and  since  the  develop- 
ment of  hospital  facilities  at  least  in  such  communi- 
ties is  very  much  more  advanced  than  in  English 
cities,  no  such  fiasco  as  has  as  yet  accompanied  the 
so-called  sanitorium  benefit  of  the  British  law  need 
be  expected.  In  less  fortunate  communities  the  in- 
surance law  itself,  not  being  cramped  by  the  iron-clad 
limitations  of  a  fixed  income,  could  easily  develop 
such  hospital  facilities. 

There  is,  however,  one  somewhat  peculiar  medical 
institution  which  perhaps  has  scarcely  anywhere  de- 
veloped to  such  high  extent  as  in  some  of  our  larger 
cities,  and  that  is  the  so-called  dispensary,  or  out- 
patient clinic,  operated  usually  in  connection  with 
hospitals,  but  sometimes  independently,  which  raises 


254,      STANDARDS  OF  HEALTH  INSURANCE 

a  great  many  important  questions  of  administration 
and  even  organization. 

An  outpatient  clinic,  popularly  known  as  a  dis- 
pensary, is  an  institution  "  for  the  proper  treatment 
of  the  sick  who  are  too  poor  to  pay  for  medical 
advice  and  treatment,  and  are  not  eligible  for  admis- 
sion to  hospitals." 8  How  well  at  least  quanti- 
tatively these  institutions  meet  the  need  in  our  large 
cities  may  be  surmised  from  the  fact  that  in  New 
York  City,  for  instance,  there  were  in  1914  130 
such  institutions,  treating  literally  millions  of  pa- 
tients. As  far  as  ambulatory  treatment  is  con- 
cerned, no  poor  working-man,  who  can  spare  the 
time  and  sometimes  the  dime,  need  to  go  without  it. 

It  may  be  argued,  therefore,  that  in  such  cities, 
at  least,  the  problem  of  medical  aid  for  the  poor  is 
largely  met.  On  the  whole  this  is  perhaps  true,  at 
least  in  regard  to  less  serious  ailments.  Nevertheless, 
the  dispensaries  are  often  criticised  and  by  some  are 
even  considered  an  evil. 

The  masses  often  criticise  these  institutions  for  the 
crude,  and  even  cruel,  way  in  which  patients  some- 
times are  treated.  The  charge  to  a  large  extent  rep- 
resents the  exaggeration  of  supersensitive  patients, 
but  it  is  admitted  that  frequently  because  of  pressure 
of  work  the  patient  is  not  treated  with  the  same 
courtesy  as  a  private  patient  in  the  physician's  pri- 
vate office  would  have  the  right  to  expect. 

•  The  Associated  Outpatient  Clinics  of  the  City  of  New 
York,  Second  Annual  Report,  1914,  p.  5. 


ORGANIZATION  OF  MEDICAL  AID      255 

More  serious  is  the  economic  aspect  of  the  case: 
dispensaries  after  all  are  charitable  institutions; 
they  are  intended  for  the  poor;  persons  there  at- 
tended are  technically  on  a  par  with  paupers. 
There  is  a  factor  there  which  deters  some  from 
applying  to  dispensaries  for  aid. 

On  the  other  hand,  dispensaries  are  sometimes 
characterized  by  the  medical  profession  as  an  evil 
because  of  the  abuse  to  which  they  are  subject,  mainly 
because,  it  is  energetically  charged,  they  offer  free 
treatment  to  patients  of  a  class  to  whom  the  pay- 
ment of  a  regular  fee  would  not  be  impossible.  The 
average  practitioner  among  the  poorer  classes,  there- 
fore, fears  the  dispensary  as  his  greatest  competitor 
for  the  paying  patient.  The  war  between  private 
practitioners  and  dispensaries,  which  has  been  going 
on  to  the  writer's  knowledge  for  at  least  twenty 
years,  is  not  devoid  of  its  humorous  aspects.  From 
the  controversial  literature  on  this  subject,  one  might 
assume  that  the  struggle  lay  between  two  groups  of 
practitioners  of  medicine.  As  a  matter  of  fact,  the 
persons  on  both  sides  of  the  trenches  are  largely  the 
same.  The  private  practitioner  who  kicks  and  rails 
against  the  dispensary  which  takes  away  his  patients 
is  frequently  the  same  practitioner  who  at  certain 
hours  of  the  day  does  the  very  selfsame  dispensary 
work. 

The  reason  for  this  is  not  difficult  to  understand. 
A  certain  number  of  physicians  are  forced  by 
economic  pressure  to  take  up  the  practice  of  medi- 


256      STANDARDS  OF  HEALTH  INSURANCE 

cine  immediately  upon  graduation  when  their  prac- 
tical knowledge  and  experience  are  slight.  The  dis- 
pensary offers  a  valuable  school  for  the  necessary 
practical  experience.  Others  more  fortunate,  having 
tried  a  course  in  the  hospital  as  well  as  in  school, 
feel  that  they  must  keep  in  touch  with  things  lest  they 
lose  hold  on  the  knowledge  and  experience  acquired. 
In  other  words,  dispensaries  attract  for  the  same 
reason  that  hospitals  attract.  In  addition  there  is 
the  possibility  of  finally  gaining  a  hospital  appoint- 
ment by  faithful  service  in  the  dispensaries.  And 
finally,  to  the  young  physician  without  any  ties  or 
valuable  connections,  the  dispensary  offers  the  only 
available  method  of  getting  in  touch  with  prospective 
patients,  a  sort  of  mild  advertising,  but  the  only 
kind  permissible  by  the  rigid  code  of  medical  ethics. 
The  physicians,  therefore,  continue  clamoring  for 
dispensary  appointments,  at  the  same  time  railing 
against  the  increase  in  dispensary  work. 

The  situation  thus  appears  sufficiently  complex. 
But  it  is  further  complicated  by  its  most  peculiar 
feature:  with  very  few  exceptions  the  work  is  done 
in  the  dispensaries  by  physicians  without  any 
financial  consideration,  which  is  also  true  of  hos- 
pitals, of  course.  It  is  assumed  that,  dispensaries 
and  hospitals  being  charitable  institutions,  "  virtue 
must  be  its  own  reward."  As  far  as  hospital  wards 
are  concerned,  the  standing  acquired  by  the  physi- 
cian through  an  appointment,  and  the  material  ad- 
vantages of  a  hospital  connection  in  the  competition 


ORGANIZATION  OF  MEDICAL  AID      257 

for  medical  practice,  are  so  great  that  perhaps  the 
question  is  less  important.  But  the  enormous  free 
work  of  struggling  physicians  in  the  charity  dispen- 
saries is  certainly  an  anomaly  not  found  in  any  other 
professional  activity. 

The  fact  often  mentioned  as  a  justification,  that 
the  physicians  obtain  in  the  dispensary  valuable  ex- 
perience, is  no  answer  at  all,  because  experience  is 
gained  through  work  in  any  profession,  and  that 
may  be  a  reason  for  lower  pay,  but  not  for  gratu- 
itous work.  The  rules  of  apprenticeship  cannot  ap- 
ply to  men  and  women  who  must  be  about  25  years 
or  over  when  beginning  the  practice  of  their  trade. 
It  has  always  seemed  to  the  writer  that  a  concerted 
movement  among  physicians  to  demand  pay  for  their 
work  in  the  dispensaries  would  have  made  the  atmos- 
phere in  these  institutions  much  more  healthy. 

The  discussion  was  undertaken  because  of  the  close 
bearing  the  problem  has  upon  the  organization  of 
medical  aid.  If,  technically,  the  dispensaries  are  in- 
tended for  persons  unable  to  pay  for  medical  aid,  and 
if  the  system  of  health  insurance  would  undertake 
to  furnish  such  medical  aid,  this  would  technically 
eliminate  millions  of  wage-workmen  from  the  cate- 
gory of  persons  entitled  to  dispensary  treatment. 
If,  as  is  likely,  and  has  been  urgently  advocated 
here,  the  medical  benefit  is  extended  to  the  members 
of  the  insured's  family,  the  inroad  into  the  clientele 
of  dispensaries  would  be  s~o  great  as  to  make  many 
of  them  unnecessary. 


258      STANDARDS  OF  HEALTH  INSURANCE 

But  yet  dispensaries,  because  of  their  technical 
organization,  if  not  economic  basis,  have  evident 
medical  advantages: 

First. — They  permit  of  an  economical  utilization  of 
the  physician's  time. 

Second. — When  properly  organized,  they  have  a  seri- 
ous advantage  of  proper  equipment,  which  in  modern 
medicine  and  surgery  is  a  matter  of  no  small  moment — 
to  mention  only  such  facilities  as  chemical  laboratories, 
facilities  for  blood  analysis,  bacteriological  laboratories, 
spectroscopes,  X-ray  apparatus,  electrical  appliances  for 
treatment,  and  so  forth.  It  is  impossible  for  a  private 
physician,  practising  among  the  poor,  to  have  an  office 
so  thoroughly  equipped. 

Third. — The  dispensary  presents  the  very  great  ad- 
vantage of  combining  the  services  of  experts  in  all  the 
numerous  specialties,  which  gives  the  patient  the  pos- 
sibility of  a  collective  advice.  It  has  been  repeatedly 
pointed  out  by  modern  writers  that  no  one  physician  can 
undertake  even  to  make  the  diagnosis  of  a  complicated 
ailment,  let  alone  prescribe  or  administer  the  treatment. 

Since  these  advantages  are  important,  and  since 
efficiency  of  medical  aid  must  be  an  essential  feature 
of  health  insurance,  shall  dispensaries  be  permitted 
to  stay  outside  for  the  benefit  of  uninsured  paupers 
only,  or  can  they  be  absorbed  into  the  health-insur- 
ance system,  without  further  exploiting  the  unpaid 
labor  of  a  numerous  profession  in  the  work  of  de- 
stroying their  opportunity  of  making  a  living? 

This  is   a  serious  problem  in   organization   and 


ORGANIZATION  OF  MEDICAL  AID      259 

administration.  A  health  insurance  system  which 
undertakes  to  do  justice  to  the  wage-worker,  and  to 
free  him  from  the  stigma  of  pauperism,  cannot  build 
its  success  upon  the  further  exploitation  of  a  profes- 
sion. Evidently  the  free  treatment  of  insured  would 
be  unfair,  and  especially  so  the  unremunerated  labor 
of  physicians  in  granting  the  treatment.  But  assum- 
ing that  all  the  work  of  the  physicians  is  reasonably 
remunerated,  it  would  seem  to  be  reasonable  to  per- 
mit dispensaries  to  practice  on  equal  terms  with 
individual  physicians.  It  is  possible  that  under  such 
circumstances  the  ordinary  cases  will  gravitate  to 
the  private  physicians,  for,  after  all,  privacy  is  a 
characteristic  much  sought  for  in  the  relations  be- 
tween physician  and  patient,  while  the  cases  needing 
the  facilities  of  the  dispensary  will  gravitate  to  them, 
perhaps  frequently  under  the  advice  of  the  private 
physician.  This  is  at  least  a  possible  development. 
Its  realization  cannot  be  accomplished  through  legis- 
lative mandates.  But  the  standards  of  health  in- 
surance may  well  include  the  permission  to  make 
arrangements  for  treatment  of  patients  with  dispen- 
saries, for  reasonable  pay,  provided  the  work  of  the 
physicians  is  paid  for  at  rates  satisfactory  to  the 
medical  profession. 


XVI 
ESTIMATES  OF  COST 

the  health-insurance  bill  of  the  American  As- 
sociation for  Labor  Legislation  was  discussed  in 
New  York  wildest  guesses  as  to  the  cost  of  the  bill, 
or  of  any  system  of  health  insurance,  were  made.  It 
is  definitely  known  what  the  British  system  costs, 
because  the  contributions  are  definitely  fixed.  The 
system  outlined  here  is  based  upon  the  fixity  of  bene- 
fits, and  contributions  adjusted  to  the  cost.  Still 
this  but  follows  the  German  system,  and  it  is  known 
that  the  German  funds  seldom  call  for  more  than 
4  1-2  per  cent  of  the  wages.  It  is  true  that  the  cost 
of  the  German  system  has  been  gradually  increas- 
ing :  For  one  thing,  the  benefits  have  increased,  partly 
by  law  and  partly  by  voluntary  action.  But  taking 
the  local  sick  benefit  funds,  which  are  the  predomi- 
nating type  and  claim  over  one-half  of  all  insured, 
in  1888  some  39  per  cent  of  the  funds  collected  dues 
equal  to  1  1-2  to  2  per  cent  of  wages,  and  46  per 
cent  2  to  3  per  cent  of  wages,  so  that  for  85  per 
cent  the  dues  were  between  1  1-2  and  3  per  cent. 
This  combined  proportion  held  true  in  1898,  though 
the  proportion  of  funds  with  dues  of  1  1-2  to  2 
per  cent  was  reduced  to  26  per  cent  and  that  be- 

260 


ESTIMATES  OF  COST  261 

tween  2  and  3  per  cent  increased  to  60.  By  1908, 
only  10  per  cent  had  dues  of  1  1-2  to  2  per  cent, 
and  55  per  cent  dues  from  2  to  3  per  cent,  but  mean- 
while the  number  of  funds  with  dues  below  1  1-2  per 
cent  became  very  small,  and  that  with  dues  from  3  to 
4  1-2  per  cent  increased  to  31  per  cent.  According 
to  the  latest  available  data  for  1912,  the  percentage 
of  funds  with  dues  from  1  1-2  to  2  per  cent  has 
further  decreased  to  8  per  cent,  and  those  with  dues 
from  2  to  3  per  cent  also  decreased  to  50  per  cent, 
while  the  number  of  funds  charging  from  3  to  4  1-2 
per  cent  increased  to  37  per  cent,  and  there  were 
2.7  per  cent  with  rates  over  4  1-2  per  cent. 
A  similar  development  was  observed  in  funds 
of  all  other  types,  as  the  following  table 
demonstrates  : 

RATE  OF  DUES  IN  1912 


Communal  insurance  ____  48.9^   24.5^  26.6£  - 

Local   sick    funds  .......  1.3"      8.4"  50.6**  37.0£ 

Establishment  funds  ....  6.8"     11.7"  49.1"  29.5"    2.9" 

Minors'  funds  ..........  5.8"    21.1"  46.6"  25.1"     1.4" 

All  funds  ..............  21.5      16.2  40.8  19.8      1.7 


It  must  be  remembered  that  the  German  sick- 
benefit  funds  also  cover  the  first  13  weeks  of  all  in- 
dustrial accidents. 

There  is  very  little  justification,  therefore,  for 
the  estimate  of  the  Mills  Bill  made  by  the  Board  of 
Trade  and  Transportation  of  New  York,  that  the 


262      STANDARDS  OF  HEALTH  INSURANCE 

cost  might  reach  $130  per  annum  for  a  wage-worker 
earning  $1,000  a  year.1 

The  academically  trained  mind  would  be  satisfied 
with  the  statement  of  the  cost  in  Germany,  as  an 
approximation.  But  the  attitude  of  the  American 
mind  must  be  reckoned  with,  which  rejects  all  such 
guesses  based  upon  analogy  with  foreign  conditions. 
No  matter  what  the  subject  of  the  comparison  may 
be,  the  same  objection  is  immediately  raised  that "  our 
conditions  are  different  from  those  of  monarchic 
Germany,"  etc.  The  writer  has  no  doubt  that  even 
an  actuarial  deduction  will  be  rejected  upon  the 
same  convincing  ground  that  the  Germans  believe  in 
the  Kaiser  while  we  believe  in  the  Declaration  of  In- 
dependence, and,  therefore,  their  figures  cannot  apply 
to  us. 

An  independent  effort  at  a  computation,  there- 
fore, appears  preferable. 

The  probable  cost  of  the  insurance  system  pro- 
posed here  cannot  be  guessed  offhand.  If  it  were 
necessary  to  compute  the  actual  rates  for  different 
trades  and  localities  in  advance,  the  problem  would 
be  still  more  difficult.  But  in  the  face  of  all  these 
statistical  and  actuarial  difficulties,  some  estimate 
as  to  the  probable  cost,  in  its  relation  to  the  wage- 
earner's  paying  capacity,  appears  quite  necessary, 
lest  the  program  outlined  appear  altogether  ex- 
travagant and  visionary,  and  be  forthwith  dismissed 

1  Pamphlet  under  title  Would  Cripple  Employers,  etc.,  is- 
sued by  the  Board  in  March,  1916. 


ESTIMATES  OF  COST  263 

as  such.  With  apologies  for  the  crudeness  of  the 
methods  used,  an  estimate  of  the  cost  is  here  under- 
taken. It  will  be  remembered  that  the  benefits  have 
been  divided  into  four  large  groups :  sickness  benefits, 
medical  aid  in  the  broadest  sense,  maternity  benefits, 
and  funeral  benefits.  A  separate  estimate  as  to  the 
cost  of  each  will  be  required. 

An  estimate  as  to  sickness  benefits  is  comparatively 
simple,  because  they  depend  entirely  upon  the  aver- 
age sickness  rate,  expressed  in  number  of  days  per 
annum.  For  the  entire  German  system,  the  average 
has  risen  in  30  years  from  less  than  6  to  more  than  9. 
The  increase  was  partly  due  to  the  extension  of  the 
minimum  period  of  assistance  from  13  to  26  weeks 
in  1903.  The  experience  of  18  years  (1888-1905) 
for  the  Leipzig  fund  indicates  about  9  days  per  an- 
num, but  within  recent  years  it  has  risen,  being  10. 4 
days  in  1912  and  11.3  days  in  1913.  The  experi- 
ence of  the  Manchester  Unity  indicates  (if  illness  for 
26  weeks  be  included)  a  rate  of  0.838  weeks  or  5.9 
days  at  the  age  of  twenty;  rising  with  age  until  at 
fifty-five  it  amounts  to  1.634  weeks  or  11.3  days. 
The  average  for  the  age  group  twenty  to  fifty-five  is 
about  7.4  days.  This  is  a  male  table,  subject  to 
some  selection  and  therefore  rather  too  favorable 
for  a  universal  compulsory  scheme.  An  average  of 
10  days  or  1.43  weeks  therefore  seems  quite  conserva- 
tive and  safe.  At  the  rate  of  66  2-3  per  cent  of  the 
wages  as  a  benefit,  the  cost  of  this  benefit  per  annum 
will  represent  0.9538  of  one  week's  wages  or,  on  a 


264      STANDARDS  OF  HEALTH  INSURANCE 

basis  of  50  weeks*  wages,  1.908  per  cent  of  the  an- 
nual earnings.2 

The  system  outlined  here  provides  a  weekly  bene- 
fit, akin  to  the  sickness  benefit,  in  case  of  childbirth, 
to  the  wage-working  woman,  such  benefit  to  extend 
for  some  definite  period,  say  8  to  12  weeks.  The 
"  rate  of  issue  "  varies  with  the  age  of  the  married 
woman;  with  the  age  of  the  husband;  with  the 
duration  of  the  marriage;  in  this  country,  as 
in  most  others,  with  the  number  of  previous 
children.  Disregarding  all  these  refinements,  how- 
ever, it  equals,  according  to  the  data  of  the 
British  actuaries,  about  15  per  100  wives.  The 
weekly  sick  benefit  in  each  case  would  be  (within 
the  limits  of  8  to  12  weeks)  from  5.336  to  8.004? 
weeks'  wages.3  If  employed  married  women  alone 
were  to  bear  this  cost,  it  would  amount  to  from  1.6 
per  cent  to  2.4«  per  cent.*  Since,  however,  married 
women  constitute  only  about  15  per  cent  of  all  the 
women  gainfully  employed  (in  manufacturing  pur- 
suits only  12  per  cent,  in  trade  and  transportation 
less  than  7  per  cent),  the  cost  of  this  benefit  if  dis- 
tributed among  all  women  would  be  only  15  per  cent 
of  the  foregoing  amount — only  0.24  per  cent  to  0.36 
per  cent  of  the  annual  earnings.  If,  as  it  should  be, 
the  cost  be  distributed  among  all  insured,  irrespective 

2 1.43  X  .667=  .9538 
.9538  -4-  .50  =  1.908 
».667  X  8  =  5.336;  .667  X  12  =  8.004 
•5.336  X  .15  -s-  .50  =  1.6#;  8.04  X  .15  -*•  .50  =  2.4* 


ESTIMATES  OF  COST  265 

of  sex,  on  the  theory  that  maternity  for  the  purposes 
of  the  insurance  system  is  only  one  of  many  different 
forms  of  physical  disability,  then  the  cost  of  the 
maternity  benefit  to  working-women  becomes  so  small 
as  to  be  hardly  worth  considering — from  0.048  to 
0.072  per  cent  of  the  wages. 

The  funeral  benefit  is  a  flat  charge  irrespective  of 
wages.  It  might  be  made  a  variable  amount,  propor- 
tionate to  wages,  but  it  scarcely  seems  necessary  to 
do  that  simply  for  purposes  of  actuarial  computa- 
tion. The  average  mortality  rate  in  this  country  is 
about  16  per  1,000.  In  absence  of  better  data  one 
may  be  excused  for  adopting  for  purposes  of  this 
crude  computation  the  standard  size  of  a  family  as 
4.6  persons.  The  average  rate  of  mortality  per 
standard  family,  therefore,  is  73.6  per  1,000  families. 
In  1900,  according  to  the  latest  data  available,  there 
were  17,430,000  persons  employed  in  personal  service, 
trade,  transportation,  and  manufactures.  Of  these, 
13,520,000  were  males,  and  only  7,455,000  were 
married  men.  Of  the  3,910,000  women  employed  in 
the  groups  of  occupations  enumerated,  510,000  were 
married,  but  it  is  reasonable  to  assume  that  with 
comparatively  few  exceptions  their  husbands  were 
also  employed.  Thus  we  have  7,455,000  complete 
families  for  17,430,000  persons  employed,  or  42.8 
per  cent.  In  addition  there  were  516,000  widowers 
and  554,000  widows,  altogether  1,070,000  widowed 
families,  or  6.1  per  cent.  For  every  1,000  persons 
gainfully  employed  we  may  assume,  therefore,  428 


266      STANDARDS  OF  HEALTH  INSURANCE 

standard  families,  with  4.6  persons  per  family,  or 
1,969  persons;  61  widowed  families,  for  which  we 
may  assume  3.6  persons  per  family,  or  222  persons ; 
and  511  persons  without  conjugal  attachments;  or 
a  total  of  2,702.  The  average  mortality  for  these 
2,702  persons  will  be  43.2,  and  the  cost  of  the  fu- 
nerals will  be  $50  X  43.2  =  $2,160  or  $2.16  per 
insured  person.  Four  cents  a  week  should  therefore 
provide  the  cost  of  a  modest  funeral  for  death  in  the 
family.  Eight  cents  will  furnish  double  that  amount 
— $100.  Again,  to  remain  ultra  conservative,  let  us 
assume  an  annual  wage  of  only  $500.  The  cost  of 
a  $50  funeral  benefit  will  therefore  amount  to  0.432 
per  cent  of  the  wages. 

The  cost  of  the  comprehensive  system  of  effective 
medical  aid  is  perhaps  the  most  uncertain  factor  in 
the  computation.  We  have  no  satisfactory  data 
either  as  to  the  amount  of  skilled  medical  aid  re- 
quired nor  as  to  the  cost  of  such  skilled  aid  at  pres- 
ent, and  we  are  especially  in  the  dark  as  to  the  pos- 
sible lowering  of  the  cost  to  be  expected  from 
effective  organization.  Nevertheless,  some  approach 
to  this  problem  may  be  permitted. 

The  Leipzig  sickness-insurance  fund  has  as  liberal 
a  system  of  medical  and  institutional  aid  as  any  fund 
in  Germany.  On  the  whole,  the  standards  of  medical 
aid  as  outlined  in  the  preceding  chapters  of  this 
study  are  not  essentially  superior  to  those  obtaining 
in  the  Leipzig  fund.  We  recognize  the  possible  dif- 
ferences in  cost  per  unit  of  service.  Nevertheless, 


ESTIMATES  OF  COST 


267 


waiving  these  differences  for  the  present,  the  rela- 
tion between  medical  and  other  benefits  is  worth  con- 
sidering. 

The  average  cost  of  insurance  per  member  was 
M.  41.73,  or  $9.93,  per  annum.    In  view  of  the  dif- 

TABLE  IV 

DISTRIBUTION-  OP  EXPENDITURES  OF  THE  LEIPZIG  SICKNESS  IN- 
SURANCE FUND.    ANNUAL  AVERAGES  FOR  1909-13 


Amount 
Marks 

Per  Cent  of 
Total 
Expenditure 

Expense  Per 
Capita*Marka 

Medical  aid  — 
Treatment  by  physicians  .  . 
Drugs    and    supplies  

1,730,254 
885,138 

21.5 
11.0 

8.97 
459 

Hospital  care,  etc  

774,481 

9.6 

4.02 

Total  medical  aid  

3,389,873 

42.1 

17.58 

Sickness  benefits  to  members 
Sickness   benefits  to   depend- 
ents    

2,288,720 
185,913 

40.9 
2.3 

17.06 
.96 

Reimbursement  to  third  party 
for  sickness  benefits  paid  .  . 

152,958 

1.9 

.79 

3,627,591 

45.1 

18.81 

Maternity    benefits  

ifif\  tit  MI 

0  n 

QQ 

Funeral   benefits  

<3  O 

on 

Administrative    expenses  

696,059 

8.6 

3.61 

8,048,494 

100.0 

41.73 

*  192,809  members. 

ference  in  wages,  however,  a  direct  comparison  is 
impossible.  The  maternity  benefits  probably  cost  a 
proportionately  greater  amount  because  of  the  large 
female  membership  (about  33  per  cent)  and  the  con- 
sequent large  number  of  births — 56  per  1,000  of  the 


268      STANDARDS  OF  HEALTH  INSURANCE 

female  membership,  or  19  per  1,000  members.  The 
cost  of  funerals  may  appear  low  because  of  the  small 
funeral  benefit  (only  about  $9.25  per  case).  A  com- 
parison between  medical  benefits  and  sickness  bene- 
fits may  nevertheless  be  made.  The  proportion  of 
medical  aid  to  sickness  benefits  is  M.  17.58  to  M. 
18.88,  or  93.5  per  cent.  Since  the  cost  of  the  sick 
benefits  has  been  determined  at  1.908  per  cent  of  the 
wages,  the  cost  of  medical  aid  would  amount  to  1.784 
per  cent  of  the  wages.  However,  an  important  cor- 
rection must  be  made  in  this  calculation.  The  Ger- 
man sickness  benefit  is  based  upon  a  50  per  cent 
scale ;  we  have  assumed  a  two-thirds  scale  of  benefits. 
Had  we  assumed  a  50  per  cent  scale,  the  cost  would 
not  be  1.908  per  cent,  but  three-fourths  of  it,  or 
1.4*31  per  cent,  and  in  proportion  to  this  the  medical 
benefit  would  only  be  1.338  per  cent. 

The  assumption  that  in  proper  proportion  to 
wages  medical  aid  would  not  cost  more  in  America 
than  in  Germany  may  be  easily  criticised.  It  is  in- 
tended only  as  a  rough  approximation.  Of  course, 
the  experience  of  thirty  years  has  given  Germany  an 
efficient  organization  which  results  in  a  low  cost  per 
unit  of  service.  But,  on  the  other  hand,  the  higher 
basis  of  American  wages  permits  of  a  much  higher 
rate  of  compensation  per  case  within  the  same  pro- 
portion of  cost  to  wages.  The  average  cost  of  simple 
medical  aid  per  member  in  Leipzig  was  about  one- 
half  of  the  combined  cost  of  medical  aid,  drugs,  and 
hospital  care.  In  actual  amounts  it  was  some  M.  9 


ESTIMATES  OF  COST  269 

per  annum,  or  about  $2.15.  If  the  computation 
made  above  be  accepted,  the  cost  of  simple  medical 
aid  in  the  United  States  would  be  0.65  per  cent  of 
$600  to  $1,000,  or  $4  to  $6.50  per  insured.  It  is 
quite  certain  that  this  would  offer  a  substantial  in- 
come to  the  attending  physician.5 

The  cost  of  the  health-insurance  system  as  a  per- 
centage of  wages,  as  here  computed,  appears  as 
follows : 

Per  cent 

Money  benefits    1.908 

Maternity  benefits 072 

Funeral  benefits 432 

Medical  aid   .  .    1.838 


3.750 

About  10  per  cent  of  this  amount  must  be  added 
for  administrative  expenses,  thus  bringing  the  total 
up  to  about  4  1-8  per  cent  of  the  wages.  In  all  the 
computations  the  intention  was  to  overestimate 

1  The  same  problem  may  be  approached  statistically  in  a 
somewhat  different  manner.  For  the  12  months  ending  Septem- 
ber, 1913,  the  physicians  of  the  Leipzig  performed  the  follow- 
ing amount  of  work: 

For  members  of    For  members'  Total 

funds  dependents 

Office  calls   1,084,940        492,741        1,577,681 

Visits  to  patients 138,612        285,569  424,181 

Operations    100,542          52,670  153,212 

Total    1,324,094        830,980        2,154,974 

Since   the   average   number   of  members    (exclusive   of  their 


270      STANDARDS  OF  HEALTH  INSURANCE 

rather  than  underestimate,  with  the  avowed  purpose 
to  allow  for  all  possible  margins,  and  make  the  result 
one  of  a  possible  maximum  rather  than  one  of  true 
probability.  Still  it  seems  very  probable  that  the 
total  cost  for  the  entire  system  will  approximate  4 
per  cent  on  an  average,  and  in  a  good  many  localities 
or  industries  will  rise  even  higher.  It  is  doubtful 
whether  anywhere  it  will  be  below  3  per  cent.  The 
law  might  reasonably  state  the  limits  between  3  and 
5  per  cent.  If  a  fund  should  desire  to  reduce  the 
total  contributions  below  3  per  cent,  it  might  well  be 
required  to  give  evidence  satisfactory  to  an  actuary 
that  it  does  not  face  the  danger  of  bankruptcy.  On 

\ 

dependents)  was  207,987,  the  average  amount  of  work  per 
member  was  as  follows: 

For  For  Total 

member         dependents 

Office  visits    5.22  2.37  7.59 

Home  visits    67  1.37  2.04 

Operations   .48  .26  .74 

6.37  4.00  10.37 

In  view  of  the  large  number  of  "  operations  "  performed  evi- 
dently even  the  simplest  manipulations  were  probably  included. 
The  medical  work  thus  even  in  the  high  development  in  Leip- 
zig represents  some  6  office  calls  and  about  2-3  of  a  visit  per 
insured  person;  with  the  entire  family  covered,  roughly  2  1-2 
calls  and  1  1-2  visits  per  insured  member  must  be  added.  It 
would  seem  that  with  proper  organization  this  amount  of  medi- 
cal work  could  be  done  for  about  $5  or  $6  per  capita.  It  is 
doubtful  whether  at  present  the  physician  practicing  among 
the  poor  wageworker  can  collect  such  an  amount  on  the 
average. . 


ESTIMATES  OF  COST  271 

the  other  hand,  an  increase  of  the  contributions  be- 
yond 5  per  cent  would  seem  to  call  for  careful  inves- 
tigation as  to  causes.6 

The  actuarial  computation  made  above  may  well 
raise  two  questions :  Is  it  worth  while  ?  Is  it  feasible  ? 
The  discussion  of  these  questions  may  be  somewhat 
beyond  the  scope  of  this  chapter,  but  their  impor- 
tance may  justify  a  brief  deviation.  Perhaps  a  brief 
answer  to  these  may  serve  instead  of  a  summary  and 
conclusion. 

Assuming  that  most  wages  fall  between  $500  and 
$1,000  a  year,  4  per  cent  of  that  will  amount  to 
from  $20  to  $40  per  annum.  The  sum  is  not  incon- 
siderable. For  the  twenty-odd  million  wage-workers 
of  the  United  States,  it  will  represent  the  staggering 
amount  of  perhaps  $600,000,000  per  annum.  But 

•Of  course,  if  the  benefits  are  reduced  below  the  standards 
outlined  here,  the  cost  will  correspondingly  decrease.  More- 
over, one  important  factor  has  been  omitted  in  the  above  com- 
putation— namely,  the  saving  for  not  paying  the  first  three 
days  of  illness. 

For  purposes  of  forming  an  estimate  of  the  bill  introduced 
in  Massachusetts,  and  identical  with  the  Mills  Bill  in  New 
York,  which  eliminated  maternity  benefits  and  medical  aid 
for  the  members  of  the  families,  the  following  computation 
was  submitted  by  the  writer  to  the  Massachusetts  legislative 
committee  early  in  March  of  1916: 

APPROXIMATE  COST  OP  THE  MASSACHUSETTS  HEALTH  INSURANCE 

BILL 

I.  Sick  Benefit* 

1.  Assumed  sick-rate,  or  number  of  sick-days  per  member,  on 
the  basis  of  German  and  English  experience  (to  be  on  the 


272      STANDARDS  OF  HEALTH  INSURANCE 

it  is  not  all  an  additional  charge.  No  one  knows 
how  much  the  American  working  class  pays  at  pres- 
ent for  sickness  benefits,  medical  aid,  and  for  funeral 
insurance  together.  We  do  know,  however,  that  for 
the  last  and  least  important  aspect  of  the  entire 
problem,  funeral  insurance,  over  $200,000,000  an- 
nually is  paid  to  industrial  insurance  companies.  In 
the  investigation  made  some  twelve  years  ago  by  the 
United  States  Bureau  of  Labor,  it  was  ascertained 
that  the  expenses  for  sickness  and  death  (exclusive 
of  sickness  benefits)  amounted  to  $26.78  per  family. 
If,  therefore,  $30  per  annum  on  an  average  can 
grant  all  the  benefits  which  have  been  outlined  in  a 

safe  side,  assumption  is  liberally  made) — 10  days,  or  1.43 
weeks. 

2.  Sick  benefit  for  1.43  weeks,  on  the  basis  of  two-thirds  of 

wages,  in  weeks  wages  (w.  w.) 

66  per  cent  w.  w.  X  1-43  =  -954!  w- w- 

3.  Discount  for  first  three  days  (Leipzig  experience 

88,743  cases,  total  sick  days  2,138,000,  first  three 
days.     88,743  X  3  =  266,229,  or  12.5  per  cent). 

.954  w.  w.  X  -125  —  .119  w.  w. 
.835  w.  w. 

4.  Cost  of  sick  benefits  in  per  cent  of  annual  wages. 

.835  w.  w.  -f-  50  =  1.67  per  cent. 

II.  Funerals. 

1.  Assumed  death  rate  per  1,000  employees  over 

16  years  of  age  (basis  of  U.  S.  Census)..       16 

2.  Cost  of  funerals  per  1,000  employees  at  $50 

per    funeral    $800 

3.  Cost  of  funerals  per  insured  employees  80c 

4.  Cost  in  per  cent  of  wages  ($600  per  annum)      .133  per  cent 


ESTIMATES  OF  COST  273 

previous  chapter,  the  answer  seems  to  be  that  it  is 
decidedly  worth  while. 

But  is  this  scheme  feasible?  Does  it  permit  of 
universal  application?  If  the  cost  of  insurance,  as 
here  computed  to  vary  between  3  and  5  per  cent, 
were  to  be  levied  in  its  entirety  on  the  wage-workers, 
it  would  produce  in  most  working-men's  families  a 
disturbance  of  their  economic  equilibrium  such  as 
would  force  them  to  look  at  this  comprehensive 
structure  of  social  legislation  as  a  sheer  expression 
of  governmental  tyranny.  A  study  of  the  available 
statistical  data  has  led  the  writer  to  the  conclusion 
that  the  economic  evolution  of  the  last  twelve  years 
has  resulted  in  a  reduction  of  the  real  wages  in  the 

III.  Medical  Benefit 
On  basis  of  Leipzig  experience: 

1.  Medical  benefit  93.5  per  cent  of  sick  (money)  benefits. 

2.  Since  basis  of  sick  benefits  under  Massachusetts  bill  is  66  2-3 

per  cent  instead  of  50  per  cent,  the  equivalent  proportion 
would  be 

.935  X  -50 

— ^ =  .70  per  cent. 

3.  Leipzig  system  provides  medical  benefit  for  entire  family, 

and  the  Massachusetts  bill  for  employee  only.    A  very  lib- 
eral assumption  is  one-half  the  cost,  35  per  cent. 

4.  If  sick  benefit  1.67  per  cent 

then  medical  benefit  1.67  X  -3$  =  .585  per  cent. 
Total: 

Sick  Benefit 1.670  per  cent 

Funeral    133        «' 

Medical   .585        " 

2.388  per  cent. 


274      STANDARDS  OF  HEALTH  INSURANCE 

United  States  by  some  10  or  15  per  cent.7  That  was 
a  slow  process  and  did  not  result  in  anything  more 
threatening  than  grumbling.  The  opposition  to  a 
definite  slash  of  several  per  cent  at  one  stroke  would 
be  such  that  no  political  party  anxious  to  remain 
in  power  would  be  likely  to  stand  ready  to  face  the 
music.  Thus,  entirely  irrespective  of  any  claims  to 
justice  in  apportionment,  the  distribution  of  the  cost 
between  the  employer  and  employee,  with  a  substan- 
tial contribution  from  the  state,  is  the  only  way  in 
which  this  large  program  may  be  realized. 

On  an  assumption  of  an  expense  rate  of  15  per  cent  gross 
(which  is  very  high)   the  gross  average  cost  will  be 

2.388  -f-  .85  =  2.80  per  cent. 
Distributed  as  follows: 

Employee 40  per  cent  or  1.12  per  cent 

Employer 40        "         or  1.12        " 

State 20        "         or     .56 

2.80  per  cent. 
IV.  Fluctuations 
According  to  sick  rate. 

Sick  rate  varies,  according  to  occupation,  between  5  to  15  days 
(only  in   a  few  extremely  unhealthy  trades  does  it  rise 

above  15). 

Minimum  Maximum 

5  days'  15  days' 

eick  rate  sick  rate 

p.  c.  of  wages  p.  c.  of  wagtt 

Cost  of  sick  benefit 835  2.505 

Funeral    133  .133 

Medical    293  .878 

1.261  3.516 

Administration    422  .422 


1.683  3.938 

T  See  "  Recent  Trend  of  Real  Wages,"  American  Economic 
Review,  Dec.,  1914,  p.  793. 


APPENDIX  I 

CONSTITUTIONALITY  OF  HEALTH 
INSURANCE 

BY  JOSEPH  P.  CHAMBERLAIN 
Legislative  Drafting  Bureau,  Columbia  University 

A  HEALTH  insurance  law  should  provide  medical  benefit 
for  employees  and  their  families,  including  maternity 
benefit,  cash  payment  during  a  given  period  to  employees 
unable  to  work  on  account  of  sickness,  and  funeral  bene- 
fits. The  necessary  funds  should  be  raised  by  contribu- 
tions from  employers,  employees,  and  the  state.  Many 
questions  of  the  constitutionality  of  such  legislation  might 
arise  in  connection  with  particular  provisions  of  state 
constitutions;  but  it  is  not  intended  here  to  discuss  any 
other  limitations  upon  the  legislature  than  those  con- 
tained in  the  Fourteenth  Amendment  to  the  Constitution 
of  the  United  States  and  the  similar  provisions  found 
in  nearly  all  the  state  constitutions :  "  nor  shall  any  state 
deprive  any  person  of  life,  liberty,  or  property  without 
due  process  of  law,  nor  deny  to  any  person  within  its 
jurisdiction  the  equal  protection  of  the  laws."  The  first 
prohibition  brings  before  the  Supreme  Court  any  legisla- 
tion affecting  individual  liberty  and  property ;  the  second 
prohibits  arbitrary  and  unreasonable  action  in  regard 
to  individuals  or  classes  of  individuals,  so  that  a  com- 
pulsory health-insurance  law  must  be  submitted  to  judi- 
cial scrutiny. 

275 


276      STANDARDS  OF  HEALTH  INSURANCE 

The  present  necessity  for  brevity  prevents  any  attempt 
to  meet  objections  to  details  of  a  possible  law,  so  that 
all  which  will  be  attempted  is  to  state  broadly  the  prin- 
ciples which  must  be  kept  in  mind  by  drafters  of  the 
health-insurance  legislation  which  seems  inevitable. 

PRESUMPTION  OF  CONSTITUTIONALITY 

It  is  important  to  remember  that  the  courts  should 
never  declare  an  act  of  the  legislature  unconstitutional 
unless  its  unconstitutionality  is  clearly  proved.  The 
burden  of  proof,  and  it  must  be  conclusive,  is  upon  those 
who  deny  the  constitutionality  of  an  act,  while  those  who 
support  it  need  only  to  refute  objections  by  raising  a 
reasonable  doubt  in  the  minds  of  the  judges  that  the 
legislature  has  exceeded  its  powers. 

Judge  Cooley,  a  writer  of  great  authority,  says  in  his 
work  on  Constitutional  Limitations,  p.  254: 

"  The  constitutionality  of  a  law,  then,  is  to  be  presumed,  be- 
cause the  legislature,  which  was  first  required  to  pass  upon  the 
question,  acting,  as  they  must  be  deemed  to  have  acted,  with  in- 
tegrity, and  with  a  just  desire  to  keep  within  the  restrictions 
laid  by  the  constitution  upon  their  action,  have  adjudged  that 
it  is  so." 

He  quotes  from  two  early  decisions  of  the  U.  S.  Supreme 
Court  to  support  his  contention,  p.  258: 

"  The  opposition  between  the  constitution  and  the  law  should 
be  such  that  the  judge  feels  a  clear  and  strong  conviction  of 
their  incompatibility  with  each  other." — Fletcher  v.  Peck,  6 
Cranch  87,  128. 

"  But  if  I  could  rest  my  opinion  in  favor  of  the  constitu- 
tionality of  the  law  on  which  the  question  arises,  on  no  other 
ground  than  this  doubt  so  felt  and  acknowledged,  that  alone 
would,  in  my  estimation,  be  a  satisfactory  vindication  of  it 


APPENDIX  I  277 

It  is  but  a  decent  respect  due  to  the  wisdom,  the  integrity,  and 
the  patriotism  of  the  legislative  body  by  which  any  law  is 
passed,  to  presume  in  favor  of  its  validity,  until  its  violation  of 
the  constitution  is  proved  beyond  all  reasonable  doubt." — 
Ogden  v.  Saunders,  12  Wheat.  213. 

The  Supreme  Court  has  not  modified  its  opinion.  It 
says  in  Atkin  v.  Kansas,  191  U.  S.  207,  p.  223: 

"  We  are  reminded  by  counsel  that  it  is  the  solemn  duty 
of  the  courts  in  cases  before  them  to  guard  the  constitutional 
rights  of  the  citizen  against  merely  arbitrary  power.  That  is 
unquestionably  true.  But  it  is  equally  true — indeed,  the  public 
interests  imperatively  demand — that  legislative  enactments 
should  be  recognized  and  enforced  by  the  courts  as  embody- 
ing the  will  of  the  people,  unless  they  are  plainly  and  palpably, 
beyond  all  question,  in  violation  of  the  fundamental  law  of 
the  Constitution." 

The  court  of  New  York  stated  the  same  point  although 
in  a  little  different  way: 

"  The  people,  in  framing  the  constitution,  committed  to  the 
legislature  the  whole  lawmaking  power  of  the  state  which 
they  did  not  expressly  or  impliedly  withhold.  Plenary  power 
in  the  legislature  for  all  purposes  of  civil  government  is  the 
rule.  A  prohibition  to  exercise  a  particular  power  is  an  ex- 
ception. In  inquiring,  therefore,  whether  a  given  statute  is 
constitutional,  it  is  for  those  who  question  its  validity  to  show 
that  it  is  forbidden."— People  t>.  Draper,  15  N.  Y.  532,  543. 

The  serious  results  which  might  flow  from  any  other 
rule  are  very  clearly  expressed  in  the  same  case: 

"  The  wisdom  of  the  conservative  maxims  of  the  courts  is 
further  exhibited  by  the  consideration  that  the  legislatures  are 
chosen  at  frequently  occurring  elections  and  for  short  terms. 
Hence,  if  they  err  in  expressing  the  wants  of  the  people,  or 
exceed  their  powers,  the  error  or  excess  may  be  quietly  and 
quickly  corrected  by  the  people  themselves,  through  sub- 
sequently elected  representatives.  But  if  this  court  wanders 
from  its  judicial  orbit,  and  in  its  progress  collides  with  a  co- 
ordinate power,  when  moving  in  its  legitimate  sphere,  who 
shall  restore  the  system  of  harmony  and  regulate  its  dynamical 


278      STANDARDS  OF  HEALTH  INSURANCE 

forces?    Such  collision  must  terminate  either  in  judicial  revo- 
lution or  new  constitutional  compacts"  (p.  549). 

See  also  Hoist  v.  Roe,  39  Ohio  State  340. 

In  his  powerful  essay  on  "  Constitutional  Law,"  Pro- 
fessor Thayer  shows  very  clearly  the  proper  limit  of  the 
power  of  the  court.  Its  duty  is  not  to  decide  whether  or 
not  the  law  is,  in  its  own  best  judgment,  in  conformity 
with  the  constitution,  but  is  to  determine  whether  as 
reasonable  men  a  legislature  could  have  believed  that 
they  were  within  their  power  in  passing  it.  "  The 
ultimate  question  is  not  what  is  the  true  meaning  of  the 
constitution,  but  whether  (the  law)  is  sustainable  or 
not."  (Thayer,  Legal  Essays,  p.  30.) 


POWER  TO  ENACT  LAWS  TO  PROMOTE  HEALTH 

The  first  prohibition  of  the  Fourteenth  Amendment 
does  not  deprive  the  legislature  of  power  to  pass  laws 
under  what  is  indefinitely  known  as  the  police  power, 
to  promote  or  protect  health.  In  the  Boston  Beer  Com- 
pany v.  Massachusetts,  97  U.  S.  25,  83,  the  court  says: 

"  Whatever  differences  of  opinion  may  exist  as  to  the  ex- 
tent and  boundaries  of  the  police  power,  and  however  difficult 
it  may  be  to  render  a  satisfactory  definition  of  it,  there  seems 
to  be  no  doubt  that  it  does  extend  to  the  protection  of  the 
lives,  health,  and  property  of  the  citizens,  and  to  the  preserva- 
tion of  good  order  and  the  public  morals.  .  .  .  They  belong 
emphatically  to  that  class  of  objects  which  demand  the  applica- 
tion of  the  maxim,  Salus  populi  suprema  lex;  and  they  are  to 
be  attained  and  provided  for  by  such  appropriate  means  as 
the  legislative  discretion  may  devise." 

More  recently  in  Jacobson  v.  Massachusetts,  197  U.  S. 
11,  25,  the  point  is  also  made: 


APPENDIX  I  279 

"The  police  power  of  a  state  must  be  held  to  embrace,  at 
least,  such  reasonable  regulations  established  directly  by  legis- 
lative enactment  as  will  protect  the  public  health  and  the 
public  safety." 

Judge  Holmes  stated  the  case  more  broadly  in  the  Noble 
State  Bank  v.  Haskell,  219  U.  S.  104,  111: 

"  It  may  be  said  in  a  general  way  that  the  police  power 
extends  to  all  the  great  public  needs.  Camfield  v.  United 
States,  167  U.  S.  518.  It  may  be  put  forth  in  aid  of  what  is 
sanctioned  by  usage,  or  held  by  the  prevailing  morality  or 
strong  and  preponderant  opinion  to  be  greatly  and  immedi- 
ately necessary  to  the  public  welfare." 

The  reason,  the  necessity,  for  leaving  the  legislatures 
free  to  deal  with  health  is  laid  down  by  the  Supreme 
Court  of  the  United  States  in  Holden  v.  Hardy,  169 
U.  S.  366,  397,  quoting  and  approving  the  words  of  the 
Supreme  Court  of  Colorado: 

"  The  whole  is  no  greater  than  the  sum  of  all  the  parts,  and 
when  the  individual  health,  safety,  and  welfare  are  sacrificed 
or  neglected  the  state  must  suffer." 

The  Court  of  Appeals  of  New  York  states  it  thus  in 
People  v.  Havnor,  149  N.  Y.  195,  203: 

"  It  is  to  the  interest  of  the  state  to  have  strong,  robust, 
healthy  citizens,  capable  of  self-support,  of  bearing  arms,  and 
of  adding  to  the  resources  of  the  country.  .  .  .  The  physical 
welfare  of  the  citizen  is  a  subject  of  such  primary  importance 
to  the  state,  and  has  such  a  direct  relation  to  the  general  good, 
as  to  make  laws  tending  to  promote  that  object  proper 
under  the  police  power,  and  hence  valid  under  the  Constitu- 
tion, which  '  presupposes  its  existence  and  is  to  be  construed 
with  reference  to  that  fact.'" 

The  problem  before  the  court  in  reconciling  a  health- 
insurance  law  with  the  Fourteenth  Amendment  will  be 
whether  health  insurance  is  designed  to  improve  the 
public  health  and  whether  the  particular  act  in  question 
may  be  supported  as  reasonable.  The  considerations 


£80      STANDARDS  OF  HEALTH  INSURANCE 

which  control  it  are  laid  down  in  McLean  v.  Arkansas, 
211  U.  S.  539,  547: 

"  It  is  also  true  that  the  police  power  of  the  state  is  not 
unlimited  and  is  subject  to  judicial  review  and,  when  exerted 
in  an  arbitrary  or  oppressive  manner,  such  laws  may  be  an- 
nulled as  violative  of  rights  protected  by  the  Constitution. 
While  the  courts  can  set  aside  legislative  enactments  upon 
this  ground,  the  principles  upon  which  such  interference  is 
warranted  are  as  well  settled  as  is  the  right  of  judicial  inter- 
ference itself.  The  legislature  being  familiar  with  local  con- 
ditions is  primarily  the  judge  of  the  necessity  of  such  enact- 
ments. The  mere  fact  that  a  court  may  differ  with  the  legis- 
lature in  its  views  of  public  policy,  or  that  judges  may  hold 
views  inconsistent  with  the  propriety  of  the  legislation  in  ques- 
tion, affords  no  ground  for  judicial  interference  unless  the 
act  in  question  is  unmistakably  and  palpably  in  excess  of 
legislative  power." 

Clearly,  the  limitations  upon  the  power  of  the  court 
make  it  certain  that  it  will  but  rarely  declare  uncon- 
stitutional acts  which  affect  health.  There  is,  it  is  be- 
lieved, no  case  in  which  a  statute  really  regulating  health 
has  been  held  unconstitutional  by  the  Supreme  Court.  In 
one  celebrated  case  the  court  reviewed  the  operation  of  a 
statute  which  had  been  upheld  in  a  state  as  a  health  law 
and  declared  that  it  was  not  a  health  law  and  so  re- 
versed the  state  court.  (Lochner  v.  N.  Y.,  198  U.  S.  45; 
Freund  on  Police  Power,  p.  124.) 

In  determining  whether  or  not  a  law  is  a  health  law 
and  therefore  whether  it  is  reasonable,  the  courts  will 
consider  the  facts.  In  Muller  v.  Oregon,  208  U.  S.  412, 
the  court  considered  a  brief  containing  extracts  from 
the  laws  of  many  American  states  and  foreign  coun- 
tries and  extracts  from  economic  reports  both  in  this 
country  and  in  Europe.  In  Bosley  v.  McLaughlin,  236 
U.  S.  385,  the  court  quoted  from  a  bulletin  of  the  United 
States  Bureau  of  Education.  In  upholding  the  Wash- 


APPENDIX  I  281 

ington  Compulsory  Compensation  Law  the  state  court 
depended  in  part  upon  the  opinions  of  "  modern  states- 
men, jurists,  and  economic  writers  "  and  the  fact  that  the 
principle  had  been  enacted  into  law  in  Europe.  (State 
v.  Clausen,  117  Pacific  1101.)  The  Court  of  Appeals 
of  New  York  depended  chiefly  upon  the  facts  gathered  by 
a  legislative  investigating  commission  to  reverse  its 
former  opinion  that  a  law  limiting  night  work  for  women 
was  unconstitutional.  (People  v.  Charles  Schweinler 
Press,  214  N.  Y.  399.)  The  evidence  was  admitted  to 
show  that  the  legislature  had  a  sufficiently  reasonable 
basis  for  taking  the  action  which  it  did  to  permit  the 
court  to  uphold  the  legislative  decision.  (See  also 
Jacobson  v.  Massachusetts,  supra;  Hennington  v.  Geor- 
gia, 163  U.  S.  299;  People  v.  Havnor,  supra;  Holden  v. 
Hardy,  supra;  People  v.  Klinck  Packing  Co.,  214 
N.  Y.  121.)  If  the  legislature  is  convinced  that  steps 
should  be  taken  to  care  for  the  health  of  employees  and 
believes  that  the  insurance  method  is  the  best  way  to 
do  it,  the  cases  hold  that  the  Supreme  Court  will  not 
declare  the  statute  unconstitutional  if  a  reasonable  eco- 
nomic argument  in  its  favor  can  be  made.  In  that 
argument  it  may  be  urged  that  health  insurance  is  a 
long  established  and  successful  method  of  conserving 
health  in  Europe. 

A  health  law  need  not  affect  directly  the  whole  popu- 
lation in  order  that  its  purpose  be  public.  It  is  suffi- 
cient if  the  health  of  the  class  affected  be  a  legitimate 
public  interest,  and  many  statutes  and  decisions  testify 
to  the  fact  that  the  health  of  employees,  or  even  of  single 
classes  of  them,  is  a  public  interest  [see  cases  cited 
above].  Section  19  of  Article  I  of  the  New  York  Con- 


282      STANDARDS  OF  HEALTH  INSURANCE 

stitution  permits  the  insurance  of  "  employees  "  against 
"injury."  The  One  Day  Rest  in  Seven  Law  recently 
passed  in  New  York,  which  prohibits  all  employers  in 
factories  or  mercantile  establishments  from  working  their 
employees  more  than  six  days  in  seven,  was  upheld  in 
the  case  of  The  People  v.  Klinck  Packing  Co.  as  "  a 
valid  exercise  of  the  police  power  of  the  state  for  the 
promotion  and  protection  of  the  public  health  and  wel- 
fare." A  New  York  law  prohibiting  barbers  from  work- 
ing on  Sundays  was  sustained  for  the  same  reason;  the 
health  of  a  single  class  of  working  people,  barbers,  was 
held  a  public  interest.  (People  v.  Havnor,  supra.)  In 
Booth  v.  Indiana,  237  U.  S.  391,  a  statute  which  pro- 
vided for  wash-houses  in  coal  mines  when  requested  by 
twenty  or  more  men  was  objected  to  as  applying  only 
to  a  particular  class  and  as  not  therefore  in  the  interest 
of  the  public  health.  The  United  States  Supreme  Court 
held  that  its  previous  decisions  disposed  of  this  point 
in  favor  of  the  constitutionality  of  the  law  "  and  further 
comment  is  unnecessary."  The  decision  in  Lochner  v. 
New  York,  198  U.  S.  45,  declaring  unconstitutional  the 
bakers'  eight-hour  law  is  not  an  authority  against  this 
view.  The  court  there  says :  "  The  act  is  not,  within  any 
fair  meaning  of  the  term,  a  health  law."  It  seems,  there- 
fore, clear  that  the  legislature  may  properly  limit  com- 
pulsory health  insurance  to  all  manual  workmen  and  for 
all  employees  up  to  a  certain  fixed  limit  of  earnings. 

Mr.  Freund,  the  most  frequently  quoted  text  writer  on 
the  subject  of  the  police  power,  sums  up  his  opinion  on 
the  constitutionality  of  compulsory  health  insurance  in 
§  437  of  his  book  on  Police  Power: 

"  In  a  large  sense,  the  community  is  certainly  interested  in 
averting  sudden  and  unexpected  losses  as  well  as  the  destitution 


APPENDIX  I  283 

following  from  sickness  and  disease,  and  the  distribution  of 
these  losses  over  large  numbers  through  insurance  is  a 
legitimate  end  of  governmental  policy.  There  is  no  warrant 
for  denying  the  state  the  power  to  adopt  compulsory  meas- 
ures for  the  purpose ;  whether  such  measures  should  be  adopted 
where  public  sentiment  is  averse  to  such  policy,  and  the 
same  objects  are  adequately  attained  by  voluntary  co-opera- 
tion, is  a  question  of  policy  and  not  of  law.  It  may,  however, 
be  safely  asserted  that  compulsory  insurance  requires  that 
either  the  state  itself  becomes  the  insurer,  or  that  it  exer- 
cise an  efficient  control  over  private  or  semi-public  associa- 
tions which  the  individual  is  compelled  to  join;  for  this  alone 
eliminates  from  the  problem  the  difficulty  that  the  state  would 
force  the  individual  to  enter  into  contract  relations  with  other 
private  parties  without  substantially  guaranteeing  perform- 
ance to  the  individual  who  is  required  to  part  with  his  money." 


CLASSIFICATION 

A  health-insurance  law  will  bring  under  compulsory 
insurance  all  employees  engaged  in  manual  labor  and  all 
others  earning  less  than  a  certain  salary,  Therefore, 
the  question  will  arise  whether  the  legislature  may  fairly 
put  them  in  a  class  for  the  purpose  of  the  insurance  as 
against  other  persons  both  to  require  them  to  pay  con- 
tributions and  to  grant  them  the  benefits.  If  employers 
also  are  singled  out  as  a  class  on  whom  part  of  the  bur- 
den is  to  be  placed,  another  difficulty  of  classification 
arises.  The  courts  are  very  liberal  in  construing  the 
power  of  the  legislature  to  classify  the  obj  ects  of  legisla- 
tion. Unless  this  classification  is  clearly  arbitrary  and 
unfair  or  unless  it  has  no  connection  with  the  object  to 
be  attained,  the  courts  will  sustain  it  and  will  not  re- 
quire that  it  should  be  a  classification  which  they  them- 
selves would  have  made.  In  Lindsley  v.  Natural  Carbonic 
Gas  Co.,  220  U.  S.  61,  the  court,  on  page  78,  lays  down 
rules  which  have  been  since  frequently  quoted  to  deter- 
mine what  is  permissible  classification: 


284.      STANDARDS  OF  HEALTH  INSURANCE 

"  The  rules  by  which  this  contention  must  be  tested,  as  is 
shown  by  repeated  decisions  of  this  court,  are  these:  1.  The 
equal  protection  clause  of  the  14th  amendment  does  not  take 
from  the  state  the  power  to  classify  in  the  adoption  of  police 
laws,  but  admits  of  the  exercise  of  a  wide  scope  of  discretion  in 
that  regard,  and  voids  what  is  done  only  when  it  is  without 
any  reasonable  basis,  and  therefore  is  purely  arbitrary.  2.  A 
classification  having  some  reasonable  basis  does  not  offend 
against  that  clause  merely  because  it  is  not  made  with  mathe- 
matical nicety,  or  because  in  practice  it  results  in  some  in- 
equality. 3.  When  the  classification  in  such  a  law  is  called 
in  question,  if  any  state  of  facts  reasonably  can  be  conceived 
that  would  sustain  it,  the  existence  of  that  state  of  facts  at  the 
time  the  law  was  enacted  must  be  assumed.  4.  One  who 
assails  the  classification  in  such  a  law  must  carry  the  burden 
of  showing  that  it  does  not  rest  upon  any  reasonable  basis,  but 
is  essentially  arbitrary." 

Very  recently,  in  passing  upon  the  classification  made 
in  the  Ohio  voluntary  compensation  law  which  distin- 
guished between  employers  of  five  men  or  more  and  those 
of  under  five  men,  the  court  said: 

"This  court  has  many  times  affirmed  the  general  proposition 
that  it  is  not  the  purpose  of  the  14th  amendment  in  the  equal 
protection  clause  to  take  from  the  states  the  right  and  power 
to  classify  the  subjects  of  legislation.  It  is  only  when  such 
attempted  classification  is  arbitrary  and  unreasonable  that  the 
court  can  declare  it  beyond  the  legislative  authority.  Lindsley 
v.  Natural  Carbonic  Gas  Co.,  220  U.  S.  61,  78.  That  a  law 
may  work  hardship  and  inequality  is  not  enough;  many  valid 
laws,  from  the  generality  of  their  application,  necessarily  do 
that  and  the  legislature  must  be  allowed  a  wide  field  of 
choice  in  determining  the  subject-matter  of  its  laws,  what  shall 
come  within  them  and  what  shall  be  excluded."  (Jeffrey  Mfg. 
Co.  v.  Blagg,  235  U.  S.  571,  576.) 

[Patsone  v.  Pennsylvania,  232  U.  S.  138,  144. 

Missouri,  K.  &  T.  Ry.  Co.  v.  Cade,  233  U.  S.  642,  650. 

International  Harvester  Co.  v.  Missouri,  234  U.  S.  199,  215. 

Miller  v.  Wilson,  236  U.  S.  373,  384. 

Price  v.  111.,  238  U.  S.  446,  453.] 

If,  therefore,  the  classification  proposed  is  broadly 
reasonable,  the  law  will  not  be  invalidated  by  the  fact 
that  certain  employees  or  certain  employers  will  not  get 


APPENDIX  I  285 

a  benefit  equal  to  that  received  by  others,  or  that  their 
contributions  will  not  be  nicely  adjusted  to  the  exact 
relation  of  the  sickness  rate  of  their  trade  or  shop  with 
sickness  rates  with  other  trades  or  shops.  The  grounds 
for  limiting  compulsory  insurance  to  certain  employees 
and  for  singling  out  employers  as  contributors  have  been 
explained  in  the  preceding  chapters.  Can  it  be  said  that 
under  the  liberal  rule  laid  down  by  the  court  they  would 
not  justify  the  broad  classification  proposed? 

ASSESSMENT  OF  CONTRIBUTIONS 

It  is  no  new  thing  for  the  legislature  to  authorize  the 
taking  of  property  by  assessment  for  purposes  calculated 
to  promote  the  public  health  or  public  interest — for  in- 
stance, the  contributions  for  sewers.  These  assessments 
are  laid  under  the  police  rather  than  the  taxing  power, 
and,  in  any  case,  are  not  subject  to  the  general  con- 
stitutional limitations  on  the  taxing  power;  nor  is  the 
money  raised  subject  to  limitations  on  the  expenditure 
of  money  for  general  state  or  local  purposes.  (Cooley 
on  Taxation,  3rd  Edition,  Chs.  XIX,  XXI,  especially 
on  p.  1300,  and  p.  1168,  Taxation  by  Assessment,  Page 
&  Jones,  §  5,  §  78  ss,  Paulsen  v.  Portland,  149  U.  S.  SO.) 

Under  the  Drainage  Act  in  New  York,  persons  owning 
property  may  be  compelled  to  pay  for  its  drainage  if 
commissioners  appointed  by  the  county  court  decide  that 
drainage  would  benefit  the  public  health.  (Matter  of 
Ryers,  72  N.  Y.  1 ;  Matter  of  Lent,  47  A.  D.  349;  David- 
son v.  New  Orleans,  96  U.  S.  97.)  A  statute  enacted 
in  several  Western  states  requires  all  land  holders  within 
a  district  to  pay  assessments  to  provide  and  maintain  a 
supply  of  water  for  irrigation.  Even  though  the  person 


286      STANDARDS  OF  HEALTH  INSURANCE 

assessed  did  not  need  the  water  and  objected  to  the 
formation  of  the  district  he  must  assume  his  share  of 
the  burden.  (Fallbrook  Irrigation  District  v.  Brad- 
ley, 164  U.  S.  112;  see  also  Hagar  v.  Reclamation  Dis- 
trict, 111  U.  S.  701.) 

The  legislature  has  authorized  taxation  of  particular 
occupations  or  property  to  create  funds  for  special  pur- 
poses, and  the  legislation  has  been  held  to  be  an  exercise 
of  the  police  rather  than  of  the  taxing  power.  Insur- 
ance agents  have  been  taxed  to  raise  money  for  the 
support  of  firemen's  benevolent  associations.  (See  Fire- 
men's Benevolent  Association  v.  Lounsbury,  21  111.  511; 
Exempt  Firemen's  Benevolent  Fund  v.  Roome,  93  N.  Y. 
313.) 

Owners  of  dogs  have  been  taxed  to  create  a  fund  out 
of  which  damages  are  paid  to  the  owners  of  sheep  killed 
by  dogs.  (McGlone  v.  Womack,  129  Ky.  274;  Hoist  v. 
Roe,  39  Ohio  State  340;  Van  Horn  v.  People,  46  Mich. 
183.) 

Banks  have  been  taxed  on  their  deposits  to  create  a 
fund  out  of  which  depositors  in  banks  becoming  in- 
solvent are  to  be  repaid.  (Noble  State  Bank  v.  Haskell, 
219  U.  S.  104;  People  v.  Walker,  17  N.  Y.  502.) 

A  system  of  land  registration  known  as  the  Torrens 
Act  adopted  in  many  states  provides  for  a  tax  on  all 
property  registered  to  form  a  fund  from  which  claims 
against  registered  property  are  paid.  (§  426  Real  Prop- 
erty Law  of  New  York,  as  amended  Ch.  547,  L.  1916.) 

The  United  States  formerly  collected  from  the  mas- 
ters or  owners  of  vessels  a  monthly  tax  of  40  cents  for 
each  sailor  to  support  the  marine  hospital  service.  The 
master  or  owner  was  empowered  to  retain  this  sum  from 


APPENDIX  I  287 

the  wages  of  the  sailor.  (§4585  Revised  Statutes,  abol- 
ished by  Act  of  June  26,  1884;  Freund,  Police  Power, 
§  434.) 

The  legislature  furthermore  has  often  taken  the  prop- 
erty of  employer  and  employee  for  the  benefit  of  the 
health  of  the  employee.  The  right  to  freely  contract 
for  labor  is  a  property  right  both  of  the  employer  and  of 
the  employee,  and  the  right  to  a  "  proper  and  free  use 
of  his  property "  is  another  property  right  of  every 
individual.  (Ritchie  &  Co.  v.  Wayman,  244  111.  509,  p. 
518,  and  In  re  Jacobs,  98  N.  Y.  98,  p.  105.)  An  em- 
ployee may,  as  was  said  by  the  United  States  Supreme 
Court  in  Lochner  v.  New  York,  198  U.  S.  45,  desire  to 
earn  extra  money  by  working  more  than  eight  hours,  and 
a  statute  limiting  hours  of  work  would  prevent  his  earn- 
ing it.  Limitations  upon  either  of  these  rights,  though 
the  taking  of  property  under  the  fourteenth  amendment, 
have,  when  not  unreasonable,  been  held  constitutional  as 
health  laws.  A  statute  limiting  the  workday  of  miners 
to  eight  hours  was  upheld  in  Holden  v.  Hardy,  169  U.  S. 
366.  That  the  legislature  may  prohibit  Sunday  work  for 
barbers  was  affirmed  in  Petit  v.  Minnesota,  177  U.  S. 
164;  People  v.  Havnor,  149  N.  Y.  145,  or  railroad  men 
in  Hennington  v.  Georgia,  163  U.  S.  299-  Women  have 
the  same  right  to  labor  as  men,  yet  their  workday  may 
be  reduced  to  ten  hours  in  certain  employments,  Muller  v. 
Oregon,  208  U.  S.  412,  or  even  to  eight,  Miller  v.  Wil- 
son, 236  U.  S.  373,  and  they  may  be  forbidden  from 
doing  night  work,  People  v.  Schweinler  Press,  214  N.  Y. 
899-  All  employees  in  factories  or  mercantile  estab- 
lishments can  be  compelled  to  quit  work  one  day  in 
seven,  People  v.  Klinck  Packing  Co.,  214  N.  Y.  121. 


288      STANDARDS  OF  HEALTH  INSURANCE 

The  question  as  to  use  of  property  of  the  employer  is 
fully  brought  out  in  People  v.  Havnor,  in  which  a  pro- 
prietor of  a  barber  shop  urged  that  a  statute  which  pre- 
vented barbers  from  working  on  Sundays  deprived  him 
of  his  property  by  "  preventing  the  free  use  of  his 
premises,  tools  and  labor,  and  thus  rendering  them  less 
productive."  The  court  said:  "Whatever  prevents  him 
from  freely  using  his  lands  or  chattels  is  a  deprivation 
of  his  property,"  (p.  199),  but  held  that  the  taking  was 
constitutional,  as  it  was  in  the  interest  of  the  public 
health.  The  right  to  property  is  protected  by  the  same 
words  of  the  constitution  as  the  right  to  liberty.  It 
has  been  frequently  held  that  the  right  to  liberty  in- 
cluded the  freedom  to  make  contracts  to  buy  and  sell 
labor;  but  this  liberty  may  be  in  part  taken  away  from 
employer  and  from  employee  by  legislation  regulating 
the  hours  of  labor.  [See  cases  cited  above.] 

If  it  is  permissible,  as  in  the  one  day  rest  in  seven 
laws,  to  deprive  the  employee  of  the  right  to  work  and, 
therefore,  to  earn  wages  during  one  day  in  seven,  if  it  is 
proper  to  prevent  his  working  more  than  eight  hours  or 
ten  hours,  and,  therefore,  deprive  him  of  a  certain  por- 
tion of  the  income  which  he  might  otherwise  have  re- 
ceived, and  if  these  property  rights  can  be  taken  from 
him  only  on  the  score  of  the  benefit  to  his  health,  it 
certainly  cannot  be  argued  that  the  state  may  not  com- 
pel him  to  contribute  a  reasonable  share  of  his  earn- 
ings to  provide  for  his  health.  If  an  employer  must  be 
content  to  lose  his  right  to  contract  with  an  employee 
for  work  on  one  day  in  the  week,  if  his  right  to  use 
his  property  to  its  best  advantage  may  be  curtailed  by 
the  requirement  that  he  allow  each  one  of  his  employees 


APPENDIX  I  289 

one  day  off  in  seven,  or  even  that  he,  as  in  some  Sunday 
laws,  cease  operations  altogether,  and  if  his  property 
right  to  freely  contract  with  his  employees  and  his  right 
to  use  his  plant  are  affected  by  statutes  limiting  the  num- 
ber of  hours  of  labor,  and  all  for  the  benefit  of  the 
health  of  his  employees,  can  it  be  maintained  that  in 
principle  the  state  cannot  require  him  to  contribute 
directly  toward  a  provision  for  the  health  of  his  em- 
ployees ? 

The  fourteenth  amendment  will  stand  in  the  way  of 
arbitrary  and  unreasonable  assessment.  (Davidson  v. 
New  Orleans,  supra.)  There  must  be  either  a  reason- 
able expectation  of  benefit  to  the  contributors  or  it  must 
appear  that  the  legislature  might  reasonably  require 
them  to  make  some  provision  for  the  protection  of  em- 
ployees. There  must  be  a  relation  between  the  subject 
of  the  assessment  and  the  object  for  which  the  money  is 
to  be  spent,  similar  to  the  relation  between  the  ownership 
of  dogs  and  the  killing  of  sheep;  the  business  of  an 
insurance  agent  and  firemen's  benevolent  funds;  the 
ownership  of  marsh  lands  and  the  necessity  for  drain- 
age; the  operation  of  a  factory  and  the  need  of  the 
operators  for  one  day's  rest  in  seven.  This  is  a  question 
of  fact.  But  the  action  of  the  court,  in  allowing  great 
weight  to  the  proof  of  actual  conditions  in  passing  upon 
labor  legislation,  will  make  the  task  of  the  proponents  of 
health-insurance  laws  much  easier.  ("  Hours  of  Labor 
and  Realism  in  Constitutional  Law,"  by  Felix  Frank- 
furter, Harvard  Law  Review,  Vol.  XXIX,  No.  4.) 


290      STANDARDS  OF  HEALTH  INSURANCE 

NEW  YORK  CONSTITUTION 

In  New  York  the  question  of  the  constitutionality  of 
health  insurance  seems  settled  by  Section  19  of  Article 
I  of  the  constitution,  which  clearly  extends  the  power 
of  the  legislature  beyond  making  provision  for  trade 
accidents  and  occupational  disease,  and  the  case  of 
Jensen  r.  Southern  Pacific  Company,  215  N.  Y.  514, 
holding  that  a  compulsory  act  to  provide  insurance 
against  industrial  accidents  passed  under  that  section 
is  not  in  conflict  with  the  Fourteenth  Amendment  of  the 
United  States  Constitution. 

**  Workmen1 1  Compensation.  §  19.  Nothing  contained  in  this 
Constitution  shall  be  construed  to  limit  the  power  of  the 
Legislature  to  enact  laws  for  the  protection  of  the  Krer,  health, 
or  safety  of  employees;  or  for  the  payment,  either  by  employ- 
ers, or  by  employers  and  employees,  or  otherwise,  either  di- 
rectly or"  through  a  state  or  other  system  of  insurance  or 
otherwise,  of  compensation  for  injuries  to  employees  or  for 
death  of  employees  resulting  from  such  injuries  without  regard 
to  fault  as  a  cause  thereof." 

Evidently  "  injuries  to  employees  "  does  not  refer  to 
accidents  alone  or  to  industrial  injuries  alone.  The 
words  "  by  accident "  used  in  workmen's  compensa- 
tion laws  to  limit  the  word  "  injuries  "  are  significantly 
omitted.  The  Constitution  of  California  uses  the  word 
"  injury  "  without  this  limitation  (Art.  XX,  §  21)  and  in 
that  state  the  statute  formerly  reading  "injuries  by 
accident "  has  been  changed  by  omitting  the  words  "  by 
accident "  in  order  to  include  disease.  (Chap.  607,  Acts 
of  1915.)  In  Massachusetts,  where  the  word  " injury" 
alone  was  used  and  there  were  no  complications  to  create 
difficulty,  the  word  has  been  held  to  include  disease. 


APPENDIX  I  291 

(Johnson  v.  London  Guarantee  &  Accident  Co.,  104  N. 
E.  735;  Hurle  v.  American  Mutual  Accident  Co.,  217 
Mass.  223.) 

The  words  "  arising  out  of  and  in  the  course  of  em- 
ployment "  used  to  limit  workmen's  compensation  acts 
to  purely  industrial  injuries  were  deliberately  omitted 
from  Section  19,  as  is  shown  by  the  fact  that  they  were 
contained  in  substitute  amendments  rejected  by  the  legis- 
lature. Article  XX,  §21  of  the  California  Constitu- 
tion also  contained  these  limiting  words  and  this  consti- 
tutional provision  was  in  effect  at  the  time  of  the  adop- 
tion of  the  New  York  amendment.  No  law  or  bill  creat- 
ing a  system  of  workmen's  compensation  for  industrial 
accident  and  occupational  disease  has  ever  included  cash 
contributions  by  employees  or  the  state;  but  the  various 
systems  of  health  and  other  forms  of  social  insurance  in 
existence  in  Europe  at  the  time  Section  19  was  adopted 
were  based  on  the  principle  of  joint  contributions  au- 
thorized by  the  amendment.  The  provision  in  the  Cali- 
fornia Constitution,  restricted  to  "  injuries  in  the  course 
of  ...  employment,"  authorizes  the  legislature  to  put 
a  burden  upon  "  employers  "  alone. 

It  would  be  difficult  to  find  words  more  appropriate 
than  those  used  in  Section  19  to  confer  on  the  legisla- 
ture that  full  discretion  in  dealing  with  all  injuries  to 
employees  which  was  the  obvious  purpose  of  the  amend- 
ment. A  constitutional  amendment,  drawn  for  the  ex- 
press purpose  of  vesting  discretion  in  the  legislature  to 
deal  as  it  thought  proper  with  the  problem  of  providing 
for  employees'  injuries  due  to  sickness,  would  prac- 
tically repeat  the  language  of  Section  19. 

So  far  as  the  New  York  Constitution  is  concerned, 


292      STANDARDS  OF  HEALTH  INSURANCE 

then,  it  may  be  argued  that  there  is  nothing  to  prevent 
a  system  of  health  insurance  wholly  paid  for  by  the 
employers  or  wholly  paid  for  by  the  state  or  generally 
by  employer,  employee,  and  the  state.  The  Fourteenth 
Amendment  of  the  Federal  Constitution,  however,  gives 
supervisory  power  to  the  courts,  state  and  federal,  to 
prevent  the  operation  of  state  laws  which  unreasonably 
burden  any  one  class  or  individual.  Probably  a  law  put- 
ting the  whole  burden  of  sickness  of  employees  on  em- 
ployers would  be  held  unreasonable  and,  therefore, 
unconstitutional,  but  can  it  be  denied  that  a  contribu- 
tion by  employers  to  a  health-insurance  fund  would  be 
justified  by  the  present  information  of  the  share  of  in- 
dustry in  causing  and  in  accelerating  disease  and  by  the 
consideration  of  the  advantage  gained  by  an  employer 
from  improved  health  of  his  workmen,  especially  if  the 
act  limited  correspondingly  his  liability  in  damage  suits? 
The  Jensen  case,  furthermore,  clearly  adopts  the  view 
that  the  compensation  law  there  approved  was  an  insur- 
ance law  passed  under  the  "  police  power  "  of  the  state ; 
that  it  was  not  a  mere  improvement  on  the  method  of 
settling  and  paying  legal  claims  and  a  mere  extension 
of  the  liability  of  the  employer.  Both  employer  and  em- 
ployee gave  up  rights.  From  the  employer  is  taken  his 
right  to  limit  recovery  to  cases  of  fault;  from  the  em- 
ployee his  right  to  full  payment  as  assessed  by  a  jury 
for  injuries  caused  by  fault,  "  his  contribution  to  an 
insurance  scheme  designed  for  his  benefit."  Could  a 
health-insurance  law  be  better  described  than  by  these 
sentences  in  that  decision: 

"  Surely  it  is  competent  for  the  state  in  the  promotion  of  the 
general  welfare  to  require  both  employer  and  employee  to  yield 
something  toward  the  establishment  of  a  principle  and  plan 


APPENDIX  I  293 

of  compensation  for  their  mutual  protection  and  advantage. 
Any  plan  devised  by  the  wit  of  man  may  in  exceptional  cases 
work  unjustly,  but  the  act  is  to  be  judged  by  its  general  plan 
and  scope  and  the  general  good  to  be  promoted  by  it.  Fortu- 
nately the  courts  have  not  attempted  to  define  the  limits  of 
the  police  power.  Its  elasticity  makes  progress  possible  under 
a  written  constitution  guaranteeing  individual  rights" 
(p.  528). 

The  court,  in  the  Jensen  case,  relies  on  the  Oklahoma 
Bank  Tax  case,  Noble  State  Bank  v.  Haskell,  as  an  au- 
thority in  its  argument  that  the  law  is  not  forbidden  by 
the  Fourteenth  Amendment.  In  that  case  Judge  Holmes 
says,  in  the  same  vein: 

"  It  would  seem  that  there  may  be  other  cases  besides  the 
everyday  one  of  taxation,  in  which  the  share  of  each  party 
in  the  benefit  of  a  scheme  of  mutual  protection  is  sufficient 
compensation  for  the  correlative  burden  that  it  is  compelled  to 
assume"  (p.  111). 

There  is  no  logical  difference  between  sickness  caused 
by  negligence  and  accident  caused  by  negligence.  With 
the  removal  of  the  common  law  defenses  and  the  advance 
in  medical  and  sanitary  knowledge  a  wide  field  is 
opened  for  employers'  liability.  Increasingly  the  labor 
law  puts  the  "  health  "  of  employees  on  the  same  plane 
as  their  "  safety."  "  Sanitary  "  is  included  as  one  of 
the  requirements  of  a  safe  working  place.  While  these 
provisions  may  not  in  themselves  constitute  a  basis  for 
suits  for  common  law  damages,  they  show  a  growing 
opinion  that  loss  through  sickness  is  on  the  same  plane 
as  loss  through  accident,  an  opinion  which  will  form  the 
basis  for  an  extended  liability  through  a  growth  of  the 
law  by  court  decision  or  by  legislation.  (New  York 
Labor  Law  §51-a,  subdiv  2,  §20-b;  Burdick  on  Torts, 
third  edition,  §183;  Collins  v.  Harrison  64  L.  R.  A. 


294      STANDARDS  OF  HEALTH  INSURANCE 

156.)  The  justification  for  requiring  contributions  of 
the  employees,  aside  from  the  authority  of  the  Jensen 
case,  could  clearly  be  based  on  the  benefit  which  they 
get  and  on  the  fact  that  much  sickness  arises  from  their 
habits  of  living  and  personal  carelessness.  As  to  the 
state's  contribution,  it  cannot  be  doubted  that  the  health 
of  the  people  is  a  public  purpose  and  that  either  public 
or  private  institutions  supervised  by  the  state,  which  may 
clearly  be  said  to  improve  the  public  health,  may  receive 
state  aid.  (See  Freund  on  Police  Power,  §§  433-437,  in- 
clusive.) 


APPENDIX  II 

ORGANIZATION  OF  MEDICAL  AID 

Preliminary  Report  to  the  Social  Insurance  Committee 
of  the  American  Association  for  Labor  Legislation 

BY  ALEXANDER  LAMBERT,  M.D. 

IN  considering  any  scheme  of  medical  relief  under  the 
Sickness  Insurance  Act  one  must  consider  it  from  three 
points  of  view:  the  medical  point  of  view,  the  patient's 
point  of  view,  and  the  view  of  the  insurance-carriers. 

In  beginning  the  consideration  of  the  medical  point 
of  view,  it  is  necessary  to  consider  certain  medical  cus- 
toms and  habits  of  thought.  The  medical  service  is 
always  an  individual  one  and  the  state  requires  it  to  be 
individual.  Medical  public  opinion  demands  that  the 
physician  shall  give  an  adequate  and  just  service  to  his 
patient  and  that  the  physician  shall  not  permit  himself 
to  be  placed  in  positions  where  he  gives  careless,  incom- 
petent service  to  the  injury  of  those  under  his  care. 
Any  physician  neglecting  this  standard  loses  caste.  He 
is  condemned  by  his  colleagues,  and  the  position  or 
system  in  which  such  service  is  likely  to  occur  is  held 
in  contempt  by  the  profession  and  has  been  classified 
under  the  opprobrious  name  of  "  contract  practice."  All 
medical  service  is  really  a  contract,  and  many  physicians 
under  salaries,  such  as  with  insurance  companies  or  rail- 

296 


296      STANDARDS  OF  HEALTH  INSURANCE 

roads,  are  not  condemned,  nor  do  they  lose  caste  by 
accepting  such  contracts.  But  any  contract  which  car- 
ries with  it  an  unreasonable  amount  of  work  by  the 
doctor,  which  in  turn  forces  neglectful,  hurried  service 
to  the  patients,  is  always  condemned.  These  situations 
are  usually  found  in  certain  lumbering  and  mining 
camps  and  under  other  corporations,  and  in  the  familiar 
lodge  practice  in  large  cities. 

Lodge  practice  and  other  condemned  forms  of  con- 
tract practice  are  all  under  the  capitation  plan  of  re- 
muneration, and  the  capitation  idea  of  service  under 
sickness  insurance  has  necessarily  these  inherent  faults 
which  cannot  be  eradicated  and  can  only  be  controlled 
to  a  limited  extent  if  they  can  be  controlled  at  all.  By 
this  form  of  capitation  is  meant  the  per  patient  per 
year  form  of  payment  to  the  doctor.  Another  form  of 
capitation  which  is  used  abroad  is  frequently  used  in  a 
compromise  with  the  free  choice  system  of  the  doctor 
by  the  patient;  that  is,  a  sickness  society  has  a  certain 
amount  of  funds  that  it  can  pay  for  medical  services  to 
the  doctors.  This  lump  sum  it  gives  to  some  associa- 
tion of  doctors,  and  the  physicians  charge  up  each 
visit  and  each  act  of  service  rendered  to  each  patient 
as  so  many  points  of  work  done  against  the  medical  so- 
ciety. At  the  end  of  the  year,  each  physician  hands  in 
his  account  to  the  medical  society  and  the  total  number 
of  points  are  divided  into  the  total  amount  of  funds, 
and  the  remuneration  paid  to  the  physicians  pro  rata. 
The  two  faults  in  this  country  for  this  method  are  that 
there  is  no  society  or  association  of  physicians  which  is 
sufficiently  universal  in  its  membership  to  justify  such  a 
procedure,  for  many  men  who  would  work  among  the 


APPENDIX  II  297 

working  classes  do  not  belong  to  the  medical  societies, 
and  if  any  control  was  attempted  through  the  present 
societies,  there  would  be  many  doctors  working  among 
the  insured  who  would  be  beyond  such  control;  and,  fur- 
thermore, in  times  of  great  amount  of  sickness,  the  more 
work  that  is  done  the  less  is  each  point  of  service  worth, 
and  after  a  certain  amount  of  services  has  been  given 
by  the  physicians  the  more  work  they  do,  the  less  money 
do  they  receive  in  ratio  to  work  done.  If  the  total 
amount  paid  by  the  societies  remained  the  same,  and 
if  twice  as  much  work  were  done  by  the  doctors  in  an 
epidemic  as  in  an  average  year,  each  point  would  be 
worth  half  as  much  and  the  remuneration  would  be 
the  same  under  great  stress  of  work  as  under  an  aver- 
age year.  This  is  not  just  remuneration  and  would 
soon  bring  a  resentment  on  the  part  of  physicians  be- 
cause of  undervaluation  of  their  work  and  the  injustice 
in  it,  and  there  soon  would  develop  a  situation  similar 
to  the  other  form  of  capitation  of  overcrowded  work  and 
the  underpaid  men. 

There  is,  in  some  parts  of  Germany,  the  regularly 
paid  physician  under  definite  salary  from  the  society. 
This  might  or  might  not  work  out  well,  because  it  would 
be  a  similar  form  of  contract  to  that  of  the  railroad 
surgeons,  but  it  would  be  very  liable  in  sickness  insur- 
ance to  be  abused,  and  soon  the  inherent  faults,  as  in 
capitation,  would  develop.  Moreover,  any  sickness- 
insurance  society  could  only  hire  a  certain  number  of 
physicians,  and  unless  they  arbitrarily  refused  free  choice 
of  physicians  to  their  members  and  divided  them  in 
equal  numbers  among  their  salaried  physicians,  the 
natural  difference  in  personality  of  the  physicians  would 


298      STANDARDS  OF  HEALTH  INSURANCE 

immediately  cause  some  of  their  practices  to  be  over- 
crowded while  others  were  neglected,  and  again  the  in- 
herent faults  under  capitation  develop. 

One  comes  to  the  other  form  of  medical  service — 
that  of  visitation,  i.e.,  a  stated  fee  per  visit  per  pa- 
tient, or  with  a  fee  graded  according  to  character  of 
services,  with  free  choice  of  the  physician  by  the  in- 
sured, either  with  an  unlimited  number  of  patients  or 
with  a  limited  number  of  patients  under  a  panel  system, 
by  which  a  definite  number  of  patients  can  be  appor- 
tioned to  any  one  doctor  and  under  which  all  patients 
must  be  apportioned  to  some  doctor, — this  with  the  con- 
sent of  the  physicians  and  patients;  or,  absolute  free 
choice  of  the  physician  by  the  patient,  with  no  panel  and 
no  control  by  the  Commission  of  the  physician  through 
his  position  on  the  panel ;  or  free  choice  of  the  physician 
by  the  patient,  with  control  of  the  physicians  through  a 
series  of  committees. 

It  has  been  generally  claimed  that  free  choice  of 
physicians  and  this  visitation  method  of  so  much  per 
patient  per  visit  always  increases  the  number  of  visits 
and  the  expense  of  medical  care  to  the  insuring  so- 
cieties. These  claims,  however,  were  not  substantiated 
in  an  investigation  of  the  subject  in  Manchester,  Eng- 
land. There  is  no  question  that  from  the  medical  point 
of  view  the  visitation  system  is  the  most  just.  There 
is  no  question  from  the  patients'  point  of  view  that 
they  obtain  by  this  means  the  best  service.  There  is 
less  danger  of  neglectful  and  overcrowded  services  being 
rendered  to  them ;  it  eliminates  the  inherent  faults  of  the 
capitation  system  but  increases  the  expense  over  capita- 
tion because  it  gives  a  fair  return  which  capitation  does 


APPENDIX  II  299 

not  do.  It  seems  to  increase  the  opportunity  for  ma- 
lingering and  simulation,  which,  unless  controlled,  be- 
come the  bane  and  ruin  of  any  social-insurance  system. 
The  ethics  of  any  profession  are  but  the  moral  cus- 
toms of  the  general  community  modified  to  suit  peculiar 
services  which  that  given  profession  performs,  and  the 
ethics  of  the  average  member  of  any  profession  will  not 
rise  any  higher  than  the  average  of  the  community  in 
which  he  lives.  In  any  community,  therefore,  there  will 
be  dishonest  physicians  whose  acts  must  be  controlled 
that  they  may  render  an  honest  return  to  the  patients 
and  to  the  insurance-carriers.  Therefore,  this  human 
factor  necessitates  a  scheme  by  which  this  control  can 
be  most  economically  and  efficiently  exerted.  The  Ger- 
man system  of  committees  composed  of  workingmen  and 
physicians  seems  to  meet  this  situation  best.  For 
example,  the  Leipzig  sickness  fund  has  a  representative 
Medical  Committee  of  the  Society  doctors,  a  Concilia- 
tion Committee,  and  an  Arbitration  Committee.  This 
Medical  Committee  is  composed  of  twelve  members  chosen 
every  two  years  by  the  doctors  in  the  service  of  the 
Society.  The  duties  of  the  Committee  relate  primarily 
to  the  constant  supervision  and  the  control  of  the  work 
of  the  Society  doctors,  also  to  calculating  and  dividing 
the  remuneration  of  the  doctors  and  to  the  maintenance 
of  their  rights  and  interests.  They  scrutinize  the  charges 
that  the  doctors  make;  they  scrutinize  the  prescriptions 
of  the  doctors  for  other  medical  or  surgical  require- 
ments; they  scrutinize  the  number  of  persons  certified 
by  each  doctor  who  are  unable  to  work,  and  the  length 
of  time  of  the  inability  according  to  statistics  prepared 
by  the  Society;  they  determine  where  there  has  been 


300      STANDARDS  OF  HEALTH  INSURANCE 

improper  excess  of  the  normal  average.  In  case  of 
serious  default,  as  regards  certifying  patients  as  unable 
to  work,  the  Committee  deducts  from  the  remuneration 
of  the  doctor,  for  the  benefit  of  the  Society,  the  excess 
charges  incurred  in  consequence  of  the  default  in  pay- 
ment of  benefit.  The  Committee  communicates  semi- 
annually  to  all  the  Society  doctors  the  result  of  the  statis- 
tical preparations  on  which  they  have  based  their  work. 

This  physicians'  committee  can  discipline  the  doctors 
when  it  is  found  they  have  been  seriously  at  fault  by 
taking  one  of  the  following  actions,  in  addition  to  mak- 
ing deductions  from  the  doctor's  remuneration.  They 
can  give  him  advice  or  written  warning,  or,  after  two 
unheeded  warnings,  temporary  suspension  of  from  one  to 
twelve  months  from  attendance  on  society  patients.  The 
doctor  in  default,  however,  must  be  heard  before  a 
written  warning  or  suspension  is  invoked.  If  the  doctor 
has  been  twice  temporarily  excluded  from  the  Society 
practice,  without  result,  if  the  Society  does  not  use  its 
right  to  give  the  doctor  a  notice  to  terminate  his  con- 
tract, the  Committee  may  make  request  to  the  Arbitration 
Committee  that  the  doctor  be  permanently  excluded  from 
Society  practice.  Complaints  made  by  the  patient  or 
by  the  Society  in  regard  to  the  practice  of  a  doctor  are 
brought  before  this  Medical  Committee  for  its  opinion, 
and  the  opinion  given  on  the  case  is  communicated  to  the 
doctor  by  the  Committee.  Circulars  and  directions  which 
the  Society  proposes  to  issue  to  the  doctors  are  first 
submitted  to  the  Committee  for  its  opinion;  complaints 
by  a  doctor  against  the  Society  have  first  to  be  com- 
municated to  the  Committee,  which  has  to  give  an 
opinion  to  the  doctor  on  the  complaint.  This  opinion 


APPENDIX  II  301 

shall  be  communicated  to  the  Society.  Complaints  by 
doctors  in  regard  to  members  of  the  Society  are  to  be 
communicated  by  the  Committee  only  if  the  managing 
committee  of  the  Society  does  not  give  satisfaction  to 
the  doctor  in  regard  to  the  complaints. 

It  is  thus  seen  that  this  Committee  stands  between  the 
general  mass  of  doctors  doing  work  among  the  insured 
and  the  insuring  societies.  Although  the  Leipzig  Medi- 
cal Committee  of  twelve  seems  to  be  too  large  for  the 
best  results,  any  medical  committee  is  able  from  its 
expert  point  of  view  to  understand  the  viewpoint  of  the 
medical  profession,  which  is  peculiar  to  it  in  matters 
of  ethics  and  standards,  and  it  can  more  readily  deal 
out  justice  because  of  this  expert  knowledge.  In  this 
country,  however,  it  has  heretofore  been  difficult  to 
obtain  discipline  of  the  members  of  the  profession  by 
committees  of  the  profession.  Any  development  toward 
this  end,  in  New  York  State  in  particular,  has  been  fur- 
ther discouraged  by  several  cases  in  the  courts  in  which 
medical  societies  have  endeavored  to  discipline,  by  ex- 
pulsion, members  guilty  of  what  was  believed  to  be 
wrong-doing.  The  courts  have  almost  invariably  forced 
the  societies  to  reinstate  the  objectionable  members  and 
have  further  delivered  to  the  societies  a  severe  scolding 
because  some  minute  legal  technicalities  had  not  been 
complied  with.  The  profession  has  felt  that  the  in- 
tricacies of  the  law  have  blocked  the  development  of 
medical  control  by  the  profession  itself,  and  the  regula- 
tion of  the  profession  by  the  profession  in  New  York 
State  has  not  developed  to  the  extent  that  it  should 
have  done.  Whether  or  not,  under  a  sickness-insurance 
law,  adequate  control  of  the  medical  profession  by  a 


302      STANDARDS  OF  HEALTH  INSURANCE 

medical  committee  would  be  possible,  cannot  be  fore- 
told. With  this  responsibility,  however,  thrown  upon 
their  shoulders  and  with  adequate  rules  for  protection, 
through  such  committees,  the  medical  profession  should 
be  able  to  bring  about  the  desired  results.  If,  however, 
this  is  not  possible,  then  the  medical  profession  must 
face  the  issue  of  whether  or  not  it  will  be  forced  to 
accept  a  lay  control  or  a  combination  of  control  by  lay- 
men and  physicians. 

A  special  Conciliation  Committee  should  be  appointed 
for  deliberation  on  questions  which  appear  to  require 
consultation  between  any  society  and  its  doctors,  and 
for  the  friendly  consideration  of  all  kinds  of  differ- 
ences. In  the  Leipzig  Society,  such  a  committee  is 
further  described  as  consisting  of  the  chairman  of  the 
managing  committee  of  the  Sickness  Society  and  of  the 
representative  Medical  Committees.  Such  a  committee, 
however,  should  be  a  small  committee  of  but,  probably, 
three  members,  that  its  efficiency  and  activity  should  be 
at  a  maximum,  and  it  should  be  composed  of  a  work- 
man and  an  employer  and  a  physician,  and  should  be 
subject  to  the  call  of  any  one  of  its  members. 

The  Arbitration  Committee  should  be  composed  of 
workmen,  employers,  and  physicians,  presided  over  by  a 
member  of  the  Commission,  and  one  member  of  the  com- 
mittee should  be  a  lawyer.  It  should  be  the  final  commit- 
tee of  appeal  from  the  Medical  Committee  and  the  Con- 
ciliation Committee,  and  should  be  the  final  committee 
for  discipline  of  physicians  regarding  their  expulsion 
and  should  hear  all  appeals  made  from  the  decision  of 
the  Medical  or  Conciliation  Committee.  All  appeals 
and  disputes  between  physicians  and  the  insuring  so- 


APPENDIX  II  303 

cieties  or  between  physicians  and  any  of  the  insured 
should  also  go  through  it  to  the  Commission. 

These  committees  should  not  serve  without  pay.  The 
custom  of  most  corporations  in  this  country  of  paying  a 
gold  piece  to  their  directors  at  each  meeting  should  be 
followed  in  these  committee  meetings  to  the  extent  of 
giving  some  definite  stipend  for  attendance  at  the  meet- 
ing. Work  of  this  character  is  arduous,  and  positions  on 
the  committees  should  be  honorable  positions  and  recom- 
pense should  be  given  for  the  work  done. 

In  all  sickness  insurance  there  is  one  mooted  ques- 
tion that  constantly  arises,  and  that  is,  Who  shall  de- 
cide any  dispute  between  a  physician  and  an  insured 
member  as  to  whether  or  not  this  patient  should  go  back 
to  work  and  his  benefits  cease?  There  is  always  trouble 
if  this  work  is  left  to  the  physician  alone.  Patients  will 
demand  leniency,  will  go  to  the  doctors  who  are  lenient, 
and  physicians,  unless  of  rugged  character,  will  be 
afraid  of  losing  their  patients  and  injuring  their  income 
unless  they  are  lenient,  and  thus  the  expense  of  the  in- 
surance-carriers will  be  enormously  increased  by  a  con- 
tinuance on  the  sick  list  of  patients  who  should  be  at 
work.  If,  whenever  this  mooted  point  arises,  the  de- 
cision could  be  referred  to  some  impersonal  committee 
or  to  some  regularly  constituted,  salaried  medical  referee, 
it  would  enormously  improve  the  working  of  the  insur- 
ance act.  There  will  probably  be  required  a  medical 
inspection  department  under  a  medical  referee  or 
referees  to  control  malingering  and  valetudinarianism. 

There  is  no  intention  at  this  time  of  going  into  the 
details  of  the  regulations  necessary  for  the  smooth- 
running  of  a  sickness-insurance  scheme.  That  must  be 


304      STANDARDS  OF  HEALTH  INSURANCE 

left  as  a  matter  between  the  various  societies  and  the 
physicians  on  the  panel;  it  must  be  worked  out  under 
the  Commission  and  will  undoubtedly  vary  in  different 
sections  of  the  state.  It  is  doubtful  if  the  remuneration 
to  the  physicians  per  patient  per  visit  will  vary  much 
in  different  parts  of  the  state  because  the  sickness  in- 
surance is  limited  to  persons  of  definitely  limited  wages. 
The  compensation  law  now  demands  that  medical  serv- 
ices shall  be  paid  subj  ect  to  regulation  by  the  commission 
and  shall  be  limited  to  such  charges  as  prevail  in  the 
community  for  similar  treatment  of  injured  persons  of 
a  like  standard  of  living,  but  does  not  limit  the  wages 
of  those  employed  who  are  subject  to  the  Act. 

From  the  patients'  point  of  view,  efficient  medical 
service  is  necessary.  Any  general  sickness-insurance  law 
among  the  poor  will  develop  an  increase  of  medical  serv- 
ice and  demands.  Some  form  of  sickness  or  injury  has 
been  the  calamity  through  which  the  poverty  of  the  poor 
has  been  changed  to  destitution  in  the  majority  of  those 
applying  to  charity  for  aid,  so  that  often  all  that  has 
separated  poverty  from  destitution  has  been  the  ability 
of  the  wage-earner  to  go  to  work  each  day.  Just  so 
soon  as  the  wage-earners  realize  that  they  can  have  medi- 
cal care  as  their  due,  without  further  expense  than  al- 
ready borne  by  them,  it  is  bound  to  increase  enormously 
the  demands  on  the  medical  profession.  Of  course, 
after  a  few  years,  when  they  become  used  to  the  idea, 
the  mass  of  trivial  and  unnecessary  calls  will  diminish, 
but  a  certain  amount  of  unsuspected  sickness  among  the 
poor  will  come  to  light  and  will  probably  increase  the 
necessities  of  medical  care  beyond  any  calculated  ex- 
pectations. Adequate  medical  services  to  the  patient 


APPENDIX  II  305 

must  contain,  at  times,  the  possibilities  of  more  than 
the  average  practitioner  can  necessarily  furnish.  The 
standard  demanded  from  the  individual  practitioner  will 
probably  not  exceed  that  demanded  under  the  English 
Act,  which  considers  that  adequate  medical  attention 
and  treatment  is  that  treatment  of  a  kind  which  can 
consistently,  with  the  best  interests  of  the  patient,  be 
properly  undertaken  by  a  general  practitioner  of  ordi- 
nary professional  competence  and  skill.  The  physicians 
of  the  Book  Printers'  Sickness  Fund,  of  Berlin,  agree 
to  care  for  all  members  not  requiring  hospital  treatment 
and  to  expedite  recovery  to  the  best  of  their  power. 
In  the  Leipzig  Sickness  Fund,  physicians  agree  to  give 
requisite  treatment  in  accordance  with  the  recognized 
custom  of  the  medical  profession.  The  English  Act  does 
no  more  than  provide  the  advice  of  the  panel  doctor  as 
to  how  further  treatment  may  be  obtained.  It  fails 
noticeably  to  furnish  expert  care  or  advice  or  adequate 
hospital  accommodations ;  it  only  attempts  to  provide  this 
in  tuberculosis. 

In  the  Sickness  Societies  of  Germany  there  are  many 
specialists  to  whom  the  patients  may  go.  The  Leipzig 
Society  employed  ISO  specialists  and  24  dental  sur- 
geons out  of  its  total  of  400  doctors;  the  Dresden  So- 
ciety 64  out  of  its  total  of  226.  These  necessary  de- 
tails of  organization  must  be  left  to  the  arrangement 
of  the  local  societies.  There  is  no  doubt,  however,  but 
that  the  details  of  what  is  ordinary  and  what  is  extra 
work,  such  as  the  difference  between  day  calls  and  night 
calls,  the  difference  between  office  visits  and  home  visits, 
the  detail  of  the  ability  of  the  general  practitioner  to 
call  in  a  consultant  if  he  or  the  patient  shall  demand  it, 


306      STANDARDS  OF  HEALTH  INSURANCE 

what  shall  be  the  fees  under  these  circumstances,  or 
whether  all  consultation  work  shall  be  done  by  the  medi- 
cal referees,  are  all  questions  coming  up  for  decision. 

There  is  no  question  that  modern  medical  treatment 
demands  more  team  work  among  physicians  than  was 
formerly  done.  The  bacteriological  examinations  of 
sputum,  of  throat  cultures,  etc.,  are  done  in  this  country 
free  of  charge  by  the  city  and  state  departments  of 
health.  But  X-ray  diagnoses  and  any  other  special  diag- 
nostic procedures  must  still  come  under  the  specialist 
category. 

This  brings  us  to  the  question  of  the  dispensaries,  and 
back  of  the  dispensaries,  the  hospitals.  Up  to  this  time 
the  dispensaries  and  the  hospitals  have  been  the  ex- 
pression of  the  amount  of  free  medical  care  that  the  city 
or  state  governments,  or  private  corporations,  were  will- 
ing to  give  to  the  poor.  A  well  conducted  and  well 
organized  dispensary  offers  the  most  economical  and 
efficient  method  of  giving  to  the  patients  the  many  spe- 
cialized medical  services  that  the  varying  nature  of  their 
illnesses  may  require.  More  diversified  medical  and 
surgical  work  is  performed  in  the  dispensaries  than  is 
performed  in  the  hospitals.  There  is  less  specialized 
service  in  the  majority  of  the  hospitals  than  in  any 
dispensary  of  even  moderate  size.  But  there  are  more 
hospitals  given  over  to  special  work  than  there  are  dis- 
pensaries so  constituted,  although  most  special  hospitals 
have  also  a  dispensary  attached  to  them  for  the  sake 
of  obtaining  patients  to  fill  the  hospitals.  Most  of  the 
medical  positions  in  dispensary  or  hospital  are  occu- 
pied without  remuneration,  the  medical  experience  being 
sufficient  compensation  in  this  country  for  whatever  time 


APPENDIX  II  307 

or  knowledge  the  doctor  may  bestow.  Abroad,  in  cer- 
tain countries,  similar  positions  have  a  salary  attached 
to  them,  and  medical  men  are  not  expected  to  give  their 
medical  or  surgical  knowledge  and  services  uncompen- 
sated. 

Under  the  Sickness  Insurance  Law,  the  general  dis- 
pensaries present  opportunities  for  an  adequate  and  well- 
developed  method  of  furnishing  abundant  services  in 
special  branches  of  medical  or  surgical  care  to  all  pa- 
tients who  are  not  too  sick  for  hospital  care  and  who 
may  require  some  special  service  which  the  average 
general  practitioner  cannot  give  them.  The  situation, 
however,  will  arise  whether  or  not  the  dispensaries 
should  be  confined  to  the  use  of  the  development  of  the 
specialties  and  all  the  general  medical  care  given  in  the 
homes  of  the  patients,  or  whether  patients  shall  be  al- 
lowed to  choose  between  their  own  doctor  and  some  gen- 
eral practitioner  in  the  dispensary  as  far  as  the  general 
medical  care  is  concerned.  This  is  a  question  which 
contains  serious  possibility  of  dispute.  It  may  be  that 
the  general  medical  classes  of  a  dispensary  may,  in  the 
end,  be  developed  into  a  place  where  patients  may  go  for 
expert  diagnosis  on  the  plane  of  the  consultant,  being 
referred  back  to  their  physician  for  care  or  being 
referred  to  specialists  if  such  be  necessary;  the  dispen- 
sary becoming  then  an  institution  for  special  care  or 
expert  diagnosis  and  not  containing,  as  now,  classes  in 
ordinary  internal  medicine.  However  this  may  be  de- 
cided, medical  services  rendered  in  the  dispensary  must, 
in  future,  receive  remuneration,  and  free  dispensaries 
soon  be  a  thing  of  the  past.  Physicians  in  the  dis- 
pensaries, moreover,  must  be  under  control  of  the  com- 


308      STANDARDS  OF  HEALTH  INSURANCE 

mittees  controlling  the  doctors  in  general  insurance  prac- 
tice, and  if  the  dispensaries  are  run  by  private  corpora- 
tions, it  must  be  within  the  power  of  the  Commission  to 
forbid  persons  under  the  Insurance  Act  to  go  to  dis- 
pensaries which  do  not  give  adequate  medical  service. 
In  all  probability,  if  the  Commission  should  publish  to 
the  insured  that  a  certain  dispensary  was  failing  to  give 
adequate  medical  care,  the  stigma  of  such  publication 
would  soon  force  any  private  corporation  to  give  ade- 
quate medical  services.  The  rules  and  regulations  by 
which  patients  are  permitted  to  accept  the  hospital 
provision  of  the  Sickness  Insurance  Act  will  have  to  be 
under  definite  agreement  and  the  care  received  in  the 
hospitals  under  definite  supervision. 

Under  the  Workmen's  Compensation  Law,  disputes 
arise  because  in  the  same  ward  one  patient  will  be  under 
the  Compensation  Law  and  another  not,  and  any  surgeon 
is  liable  to  be  accused  by  the  patient  not  under  the 
Compensation  Law  of  neglecting  him  and  favoring  the 
man  under  Compensation,  because  of  the  extra  fee  given 
to  the  surgeon.  The  Workmen's  Compensation  Law 
makes  certain  poor  patients  pay-patients  and  necessarily 
leaves  others  out  of  this  category.  Sickness  Insurance 
Laws  will  probably  act  in  the  same  way  in  the  medical 
wards  in  the  same  hospitals,  and  the  human  element  of 
envy  and  resentment  on  the  part  of  the  patients  will 
bring  many  disputes  and  complaints  of  the  service 
rendered  to  them.  It  is  doubtful  if  the  attending  physi- 
cians and  surgeons  in  the  large  public  hospitals  should 
take  positions  on  insurance  panels.  It  would  seem  wiser 
if  they  did  not.  They  usually  have  reached  a  position  in 
their  profession  where  their  private  practice  is  not  among 


APPENDIX  II  309 

those  persons  who  will  be  insured  by  the  Sickness  In- 
surance Act.  It  would  seem  wiser,  therefore,  that  it 
should  become  a  custom  that  the  attending  physicians, 
at  least,  should  care  for  all  alike  without  remuneration 
and  that  the  special  work  required  by  the  Sickness  Insur- 
ance should  be  done  by  some  assistant  and  not  by  the 
attending  physician.  The  attending  physician,  there- 
fore, in  charge,  would  give  his  services  to  all  alike  and 
there  could  be  no  criticism  or  envy  on  the  part  of  the 
patient  for  care  received.  The  decision  required  by  the 
Sickness  Insurance  Act  as  to  when  the  patient  was  ready 
to  leave  the  hospital  and  go  to  work,  of  filling  out  the 
certificate  necessary  under  the  working  of  the  Act,  the 
special  daily  hospital  care  and  attention  required,  should 
be  done  by  some  assistant  against  whom  the  question  of 
unequal  attention  between  patients  could  not  arise. 
Adequate  supervision  of  smaller  hospitals  in  which  there 
is  no  house  staff  must  be  formulated  by  the  Commis- 
sion, for  there  is  no  question,  as  stated  above,  that  ade- 
quate medical  and  surgical  service  must  be  given  and 
must  be  controlled,  whether  this  service  be  in  the  homes 
of  the  patients  or  in  the  hospitals  and  dispensaries  to 
which  they  may  go. 

From  the  point  of  view  of  the  insuring  societies,  they 
must  realize  that  they  must  give  to  the  medical  profession 
an  adequate  remuneration  for  work  done,  and  in  return 
for  a  just  fee  they  have  a  right  to  demand  that  the  serv- 
ice given  shall  be  of  full  time  and  medically  adequate. 
The  German  method  of  giving  generously  a  little  more 
than  the  strict  letter  of  the  law  demands  in  drugs,  spec- 
tacles, trusses,  and  all  medical  and  surgical  apparatus, 
to  the  insured  should  be  followed  rather  than  the  inade- 


310      STANDARDS  OF  HEALTH  INSURANCE 

quate  English  method  of  giving  only  the  cheapest  medical 
and  surgical  appliances  and  refusing  to  give  adequate 
spectacles  or  other  surgical  appliances  because  they  are 
of  more  than  average  expense.  The  result  in  Germany 
has  been  a  diminutien  of  the  length  of  time  that  medical 
benefits  have  been  paid,  and  the  result  in  England  has 
been  a  long  continuance  of  patients  on  the  sick  lists 
drawing  money  benefits.  Judging  from  the  Fabian  re- 
port, the  English  method  has  been  truly  one  of  "  penny 
wise,  pound  foolish." 

We  have  considered  here  the  working  and  necessities 
of  medical  care  and  control  under  a  compulsory  sickness 
insurance  as  exemplified  chiefly  in  England  and  Ger- 
many, as  these  two  types  of  compulsory  insurance  give 
the  best  examples  of  the  results  of  the  various  methods 
employed  for  the  carrying  out  of  compulsory  sickness 
insurance.  Many  difficulties  of  administration  and  many 
failures  in  administration  have  developed  in  both  coun- 
tries through  the  employment  of  the  capitation  plan  of 
remuneration  to  the  physicians.  In  Germany  this  has 
resulted  in  bitter  animosity  between  the  medical  pro- 
fession and  the  insuring  societies  and  bitter  contests  for 
increased  remuneration  in  which,  in  the  enormous  ma- 
jority of  contests,  the  physicians  have  won.  In  England 
it  has  resulted  in  inadequate  care  being  given  to  the 
majority  of  the  insured  under  the  Act.  In  this  country 
it  would  seem  to  be  useless  to  attempt  to  repeat  the  in- 
herent faults  of  capitation  payment,  and  medical  opinion 
and  customs  in  this  country  are  already  in  vigorous 
antagonism  to  this  form  of  "  contract  practice."  It 
would  seem  unwise,  therefore,  to  start  with  the  bitter 
antagonism  of  the  medical  profession  against  capitation. 


APPENDIX  II  S11 

This  would  seem  to  force  the  necessity  in  this  country 
of  a  remuneration  based  on  the  visitation  system.  With 
this  point  of  view  clearly  recognized,  many  difficulties 
experienced  abroad  will  not  occur  and,  in  fact,  the 
chief  stumbling  block  to  the  successful  carrying  out  of 
the  law  is  removed. 


INDEX 


Accidents,  44-54;  industrial, 
and  health  insurance,  48- 
55;  mortality  from,  45; 
non-industrial,  47. 

Actuarial  difficulties  of  in- 
validity insurance,  63. 

Administration,  expenses  un- 
der private  insurance. 
193;  organization,  204-13; 
in  social  insurance,  269. 

Age,  effect  upon  cost,  215; 
and  rates  of  contribution, 
224-6;  limits,  exception 
for,  37. 

Agency  system,  waste  of,  191. 

Agricultural  laborers,  insur- 
ance for,  32-3. 

Alaska,  compensation  act,  54. 

Albany  hearing  on  health  in- 
surance, 139,  175,  197. 

American  Association  for  La- 
bor Legislation,  3,  9, 
100-1,  113,  169,  173,  250, 
260,  295;  health  insurance 
bill  of,  53;  social  insur- 
ance committee,  7. 

American  compensation  acts, 
maximum  benefits  under, 
103;  waiting  period  un- 
der, 107. 

American  Economic  Review, 
15,  274. 

American  Labor  Legislation 
Review,  9. 

American  Medical  Associa- 
tion, 93,  246. 

Appliances,  provision  for,  149. 

Arbitration  committees  for 
medical  disputes,  299,  302. 

"  Arising  out  of,"  meaning  of, 
291. 


Arizona,  compensation  act, 
medical  aid  under,  54. 

Assessment,  constitutionality 
of,  285-9. 

Assessment  system,  advan- 
tages of,  221. 

Australia,  maternity  benefits, 
123;  old  age  pensions, 
163. 

Austria,  health  insurance,  11, 
18,  20;  employers'  con- 
tribution, 156;  extent  of, 
31 ;  industrial  acccidents 
under,  50,  158;  maternity 
benefits,  123 ;  organiza- 
tion of,  189;  money  bene- 
fits, duration,  105;  scale 
of,  110. 

Belgium,  compulsory  health 
insurance,  20,  21;  vol- 
untary health  insurance, 
20;  number  insured,  22. 

Berger,  Victor,  old  age  pen- 
sion bill,  4. 

Block,  Mrs.  A.  C.,  on  health 
insurance,  138. 

Book  Printers'  Sickness 
Fund,  of  Berlin,  305. 

Bosnia-Herzegovina,  mater- 
nity insurance,  123. 

Bremen,  medical  aid  to  mem- 
bers of  family,  90. 

Burritt,  B.  B.,  4. 

California,  compensation  act, 
2;  "injury,"  meaning  of, 
290;  scale  of  benefits, 
107;  occupational  diseases 
under,  55-7;  state  insur- 
ance, 179. 


313 


314 


INDEX 


Capitation  system,  296. 

Carr,  Garnett,  and  Taylor, 
225. 

Casual  laborers,  health  insur- 
ance for,  32,  34. 

Casualty  Actuarial  and  Sta- 
tistical Society,  proceed- 
ings, 3,  45,  228. 

Central  administration  for 
health  insurance,  210. 

Chamberlain,  J.  P.,  9;  on 
constitutionality  of  health 
insurance,  275-94. 

Childbirth,  mortality  from, 
126. 

Children,  mortality  of,  91, 
128. 

Clark,  W.  E.,  16. 

Classification,  constitutionality 
of,  283. 

Clerical  employees,  health  in- 
surance for,  35-6. 

Cologne,  medical  aid  to  mem- 
bers of  family,  90. 

Colorado,  compensation  act,  2 ; 
maximum  benefits  under, 
103;  state  insurance,  179. 

Commercial  insurance,  objec- 
tions to,  12. 

Competition  between  insur- 
ance carriers,  140. 

Compulsion,  18-28;  advan- 
tages of,  21-4;  attacks 
upon,  23-8. 

Compulsory  health  insurance, 
19,  20,  21. 

Conciliation  committees  for 
medical  aid,  299,  302. 

Connecticut,  compensation  act, 
2. 

Constitutionality  of  health  in- 
surance, 275-94. 

Contract  practice,  295. 

Contributions,  amount  of,  214. 

Convalescence  benefits,  148, 
151. 

Cooley,  Judge,  quoted,  276. 


Cost  of  insurance,  distribution 
of,  153-67,  168-77;  the- 
ories underlying,  174-6; 
under  voluntary  insur- 
ance, 155. 

Cost  of  insurance,  estimate  of, 
260-74;  shifting  and  in- 
cidence, 165-7;  variations 
due  to  ocupation,  220. 

Cost  of  living,  14. 

Davis,  M.  M.,  9. 

Dawson,  M.  M.,  175-6. 

Democratic  administration, 
necessity  for,  205-7. 

Denmark,  health  insurance  in, 
18,  20;  dental  care,  77; 
duration  of  benefits,  104; 
extent  of  insurance,  23, 
29;  funeral  benefits,  140; 
hospital  facilities,  84 ;  ma- 
ternity benefit,  123;  med- 
ical benefit,  69;  medical 
benefit  to  family,  90; 
medical  organization,  243 ; 
medical  supplies,  80 ; 
money  benefit,  98-9;  or- 
ganization of  health  in- 
surance, 182-3;  relation  to 
invalidity,  60;  waiting 
period,  107;  state  contri- 
bution, 155-6. 
Old  age  pensions,  163. 

Dental  benefits,  77,  148. 

Dental  diseases  among  poor, 
79. 

Dental  parlors,  29. 

Dentistry,  development  of,  in 
U.  S.,  78. 

Diets,  special,  grant  of,  149. 

Disability,  total,  benefits  for, 
59. 

"  Disablement "  benefits  in 
Great  Britain,  60,  105. 

Dispensary,  problem,  253-8, 
306-8 ;  advantages  of, 
235-6,  258;  .  charges 
against,  254-5. 


INDEX 


315 


"Doctors'  strikes"  in  Ger- 
many, 247. 

Domestic  servants,  health  in- 
surance for,  32,  33. 

Dresden,  medical  aid  to  fam- 
ily in,  90;  provision  for 
specialists,  305. 

Druggists'  panels,  252. 

Drugs,  furnishing  of,  80;  or- 
ganization of  supply,  250. 

Dublin,  Dr.  L.  I.,  45,  238. 

Durand,  E.  D.,  16. 

Duration  of  benefits,  104-6. 

Dusseldorf,  medical  aid  to 
family  in,  90. 

Economic  World,  11,  12,  27, 
190. 

Economy  of  administration, 
204,  206-7. 

Efficiency  under  democratic 
administration,  204,  206. 

Emerson,  Dr.  Haven,  9. 

Employees'  contribution,  ar- 
guments for,  161-5. 

Employers'  contribution  un- 
der compulsory  insurance, 
155-6;  arguments  for, 
157-60;  to  mutual  aid  so- 
cieties, 200;  under  volun- 
tary insurance,  160. 

Employers,  gain  from  health 
insurance,  158;  share  in 
administration,  207-8. 

Essen,  medical  aid  to  family, 
90. 

Establishment  funds,  198. 

Exceptions  from  compulsory 
insurance,  36. 

Excessive  hazards,  charges 
for,  227. 

Experience  rating  in  com- 
pensation insurance,  228. 

Extent  of  insurance,  29-42; 
stimulated  by  democratic 
management,  205. 

External  causes,  mortality 
from,  45-6. 


Eye-glasses,  furnished  in 
Leipzig,  82. 

Fabian  Research  Department, 
73,  77,  82,  86,  164-5. 

Family,  medical  aid  to,  89-93; 
optional  extension  of 
benefits  to,  151 ;  voluntary 
insurance  for,  40. 

Family  physicians,  235. 

Feminism  and  maternity  in- 
surance, 135. 

Fibel,  L.  H.,  191,  193. 

Financial  organization,  214- 
31. 

France,  compulsory  health  in- 
surance, 20;  voluntary  in- 
surance,  20;   number   in- 
sured, 22. 
Maternity  benefits,  117,  127, 

133. 
Old  age  pensions,  163. 

Frankel,  Lee  K.,  116,  117,  238. 

Frankfort,  medical  aid  to 
family,  90. 

Frankfurter,  Felix,  289. 

Free  choice  of  druggists,  251; 
of  insurance  carriers, 
185-9 ;  of  physicians, 
241-2,  298. 

Freund,  Prof.,  280,  282,  294. 

Funeral  benefit,  140-4;  cost 
of,  265;  optional  increase 
of,  149;  under  compensa- 
tion, 143. 

General  practitioner,  235. 
Germany,     health     insurance, 
11,  18,  20. 

Cost,  260-1;  cost,  distribu- 
tion of,  168;  contribution, 
rates  of,  260. 

Drugs  and  supplies,  80-1; 
drugs,  organization  of 
supply,  251. 

Dental  care,  78. 

Employers'  contribution, 
156. 


316 


INDEX 


Germany,    extent    of    insur- 
ance, 30-1. 

Funeral  benefits,  141. 

Hospital  benefits,  84. 

Industrial  accidents  under, 
50,  51,  158. 

Insurance  organization, 
183-4. 

Maternity  benefits,  123-4; 
duration  of  benefits,  127; 
under  war  conditions,  130. 

Medical  aid,  69,  71;  con- 
flicts over,  247;  organiza- 
tion of,  243,  310. 

Money  benefit,  99-100;  du- 
ration of,  105. 

Number  insured,  22. 

Optional  benefits,  145,  148- 
50. 

Relation  to  invalidity,  59. 

Waiting  period,  107. 
Gibbon,  I.  G.,  80,  247-8. 
Government  employees,  insur- 
ance for,  32,  35. 
Gray,  John,  15. 
Great     Britain,     compulsory 
health   insurance,    11,   18, 
20,  32. 

Cost,  distribution  of,  168; 
in  low  paid  labor,  171-2. 

Drugs  and  supplies,  80,  81. 

Funeral  benefits,  141. 

Industrial  accidents  under, 
51. 

Insurance  organization, 
185-6. 

Invalidity  under,  60. 
Maternity,      benefits,      123-4; 
medical  aid  in,  125. 

Medical  benefits,  69,  72; 
criticism  of,  232;  organ- 
ization of,  243-4. 

Money  benefit,  99;  waiting 
period,  107-8. 

Old  age  pensions,  163. 

Optional  health  insurance 
benefits,  147-8,  150. 

Physicians,  conflicts  with,  247. 


Maternity,    sanatorium    bene- 
fits, "85,  253. 
State  contributions,  156. 
Unemployment  insurance,  5. 
Voluntary  insurance,  21. 
Group  wages,  99. 

Hamburg,  convalescent  homes, 
85. 

Hanover,  medical  aid  to 
family,  90. 

Hawaii,  compensation  act,  54; 
scale  of  benefits,  101. 

Health  and  Accident  Under- 
writers' Conference,  91. 

Holland,  see  Netherlands. 

Holidays,  benefits  for,  148. 

Holmes,  Justice,  quoted,  279. 

Home  workers,  insurance  for, 
32,  34. 

Honorary  members  under  vol- 
untary insurance,  155. 

Hospital  care,  84,  306-8;  ef- 
fect upon  money  benefit, 
112-5;  organization  of, 
252;  optional  extension, 
149. 

Hospital  facilities,  need  of, 
87;  in  Great  Britain,  86. 

Hungary,  health  insurance, 
11,  18,  20;  cost  of,  168; 
employers'  contribution, 
156;  extent  of  insurance, 
31 ;  industrial  accidents 
under,  50,  158;  maternity 
benefit,  123-4;  money 
benefit,  duration,  105 ; 
money  benefit,  scale,  100. 

Illegitimacy,  statistics  of,  120. 

Income  standards  for  insur- 
ance, 38. 

Indiana,  compensation  act, 
benefit  scale,  101. 

Industrial  accidents,  6. 

Industrial  commissions,  211-3. 

Industrial  Workers  of  the 
World,  5. 


INDEX 


317 


Industry,  charge  upon,  for 
health  insurance,  157;  ef- 
fect of,  upon  cost,  215; 
responsibility  of,  for  sick- 
ness, 157-8. 

"Injury,"  meaning  of,  in 
compensation  acts,  56, 
290. 

Institutional  treatment,  or- 
ganization of,  252. 

Insurance,  definition  of,  10; 
organization  of,  178-203. 

International  Ladies'  Garment 
Makers'  Union,  139. 

International  Socialist  Con- 
gress, 116. 

Invalidity,  and  sickness,  59- 
60,  104-6;  and  old  age, 
59;  insurance,  58-66;  op- 
tional benefits  for,  148. 

Iowa,  compensation  act,  med- 
ical aid,  54. 

Ireland,  medical  aid,  69. 

Isolated  member,  problem  of, 
187. 

Italy,  compulsory  health  in- 
surance, 20-1 ;  mater- 
nity insurance,  117,  127; 
voluntary  insurance,  22. 

Kansas,  compensation  act,  54; 

maximum  benefits  under, 

103. 

Kelley,  Florence,  132. 
Kentucky,  compensation  act,  2. 
Kiel,  medical   aid  to  family, 

90. 
Kollontai,  A.,  116,  119. 

Lambert,  Dr.  A.,  93,  249;  on 
organization    of    medical 
aid,  295-311. 
Lauck,  W.  J.,  16. 
Leipzig  Local  Sick  Insurance 
Fund,  184;  expenditures, 
267. 

Drugs,  furnished  by,  81-2. 
Medical  aid  given,  amount 


of,  269-70;  cost  of,  267; 
to  family,  90;  organiza- 
tion of,  299-301;  by  spe- 
cialists, 305 ;  remunera- 
tion of  physicians,  249. 

Leipzig  Local  Sick  Insurance 
Fund,  statistics,  of  acci- 
dents,   44;    of    sickness, 
106,  107,  263. 
Sanatoria,  85. 

Level  premiums,  62. 

Life  insurance  for  workmen, 
142-4. 

Limitation  of  patients  on 
panels,  244. 

Local  insurance  funds,  184, 196. 

Lodge  practice,  296. 

Loss  ratio  in  private  health 
insurance,  193. 

Louisiana,  compensation  act, 
2;  medical  aid  under,  54. 

Low-paid  labor,  contributions 
from,  170-2. 

Luxemburg,  compulsory  health 
insurance,  11,  20;  mater- 
nity benefits,  123;  money 
benefit,  100. 

Maine,  compensation  act,  med- 
ical aid  under,  54. 

Mainz,medical  aid  to  family,  90. 

Malingering,  205. 

Manchester,  medical  aid,  298. 

Manchester  Unity  experience, 
263. 

Married  women  at  work,  122; 
maternity  benefits  for, 
120;  effect  of  maternity 
insurance  upon,  132;  U. 
S.  statistics,  133-4. 

Maryland,  compensation  act, 
2;  state  insurance,  179. 

Massachusetts,  compensation 
act,  2;  benefit  scale,  101; 
compulsory  insurance, 
179;  "injury,"  meaning 
of,  290;  occupational  dis- 
eases under,  57. 


318 


INDEX 


Massachusetts,    health    insur- 
ance,   bill,    132;    cost    of, 
271-4. 
Old  age  pension  report,  3. 

Maternity,  122. 

Maternity  benefits,  116-39; 
cost,  264-5;  duration  of, 
127;  functions  of,  118; 
opposition  to,  131-8;  med- 
ical aid  under,  125-6;  op- 
tional increase  of,  147; 
relation  to  health  insur- 
ance, 129;  standards  of, 
129-30. 

Medical  benefit,  67-93;  condi- 
tions of,  88;  cost  of,  248, 
266-70;  extent  of,  70;  ex- 
tension to  family,  89-93; 
minimum  requirements  in 
standard  act,  73-4;  op- 
tional extension,  151;  or- 
ganization, 232-60,  295- 
311;  remuneration  for, 
246;  specialized,  76;  un- 
der workmen's  compensa- 
tion, 54,  67,  236. 

Medical  committees,  299. 

Medical  disputes,  303. 

Medical  Economist,  250. 

Medical  practice,  conditions 
of,  233;  among  poor,  235; 
in  dispensaries,  256-7. 

Medical  profession,  control 
of,  300-2;  economic  inter- 
ests of,  245;  efficiency  of, 
304;  incomes  of,  240,  246; 
remuneration  in,  309 ; 
tendency  to  overcrowding, 
240. 

Medical  service,  efficiency  of, 
304. 

Metropolitan  Life  Insurance 
Co.,  45,  46,  238. 

Michigan,  state  insurance,  179. 

Mills  bill,  92-3,  113-4;  cost  of, 
261-2,  271-4;  maternity 
insurance,  132,  138;  med- 
ical organization,  250. 


Mittelstandsbeweffung,  39. 

Minimum  benefits,  112. 

Minimum  wage,  6,  59. 

Minnesota,  compensation  act, 
2. 

Money  benefit,  94-115;  cost  of, 
264-5;  duration,  104-6; 
while  in  hospital,  112-5, 
148-9;  maximum  limit, 
103-4;  minimum,  102;  op- 
tional increase  of,  147-51 ; 
sliding  scale  suggested, 
103;  under  union  benefit 
funds,  95-6;  uniform 
scales,  97. 

Monitor,  197. 

Montana,  compensation  act, 
medical  aid,  54. 

Mortality,  among  children, 
128;  from  childbirth,  126. 

Motherhood  insurance,  118-9. 

Mothers'  pensions,  4. 

Mudgett,  B.  D.,  63. 

Munich,  sanatoria,  85. 

Mutual  aid  funds  in  Germany, 
184-6. 

Mutual  benefit  societies  as 
carriers,  199-200. 

Mutual  insurance  companies, 
status  under  health  insur- 
ance, 194-5. 

National  Convention  of  In- 
surance Commissioners, 
192. 

Nearing,  Scott,  12-13. 

Netherlands,  compulsory  health 
insurance,  11,  20;  em- 
ployers do  not  contribute, 
156;  insurance  organiza- 
tion, 189;  medical  aid  not 
given,  69;  money  benefit, 
100. 

Nevada,  compensation  act,  54. 

New  Hampshire,  compensa- 
tion act,  54. 


INDEX 


319 


New     Jersey,     compensation 
act,  2,  100-1 ;  medical  aid, 
54. 
Health  insurance  bill,  7,  132. 

Newman,  Pauline,  139. 

New  Review,  16. 

New  Statesman,  75,  77,  141-2, 
165,  187,  219. 

New  York,  compensation  act, 
benefits  under,  101;  in- 
surance organization,  27; 
state  insurance,  179. 
Health  insurance  bill,  7, 
132;  see  also  Mills  bill. 

New  York  Association  for 
Improving  the  Condition 
of  the  Poor,  14. 

New  York  Board  of  Trade 
and  Transportation,  261-2. 

New  York  Call,  139. 

New  York  Constitution  in  re- 
lation to  health  insurance, 
290-4. 

New  York  Court  of  Appeals, 
279. 

New  Zealand,  old  age  pen- 
sions, 163. 

Non-contributory  insurance, 
163;  disadvantages  of, 
164. 

Norway,  compulsory  health 
insurance,  18,  20;  extent 
of,  31 ;  insurance  organ- 
ization, 189 ;  maternity 
benefits,  123-4;  money 
benefits,  duration,  105; 
scale  of,  100;  state  con- 
tribution, 156. 

Nursing  as  an  optional  bene- 
fit, 149. 


Occupation,  effect  upon  cost, 
215 ;  upon  rates,  226. 

Occupational  diseases,  55-7. 

Ohio,  compensation  act,  2, 
27-8;  scale  of  benefits, 
101. 


Oklahoma,  compensation  act, 
2;  medical  aid  under,  54. 

Old  age  pensions,  3-5,  65,  148. 

One-day-rest-in-seven  law,  282. 

Optional  benefits,  145-52. 

Oregon,  state  insurance  in, 
179. 

Out-patient  clinics,  see  Dis- 
pensaries. 

Osier,  Professor,  78. 

Overinsurance,  dangers  of,  49, 
201-2. 


Panama  Canal,  organization 
of  medical  aid,  238. 

Panel  system,  298. 

Pennsylvania,  compensation 
act,  2;  medical  aid,  54; 
state  insurance,  179. 

Physician,  day's  work  of,  239 ; 
income  of,  237;  propor- 
tion to  population,  239; 
remuneration  of,  in  dis- 
pensaries, 257.  See  Med- 
ical Profession. 

Police  power  of  state,  281-3. 

Post  office  contributors  in 
Great  Britain,  188. 

Power  to  enact  health  laws, 
278. 

Presumption  of  constitution- 
ality, 276-8. 

Prevention  of  disease,  68. 

Preventive  effect  of  employ- 
ers' contribution,  159;  of 
money  benefit,  95;  of 
democratic  administra- 
tion, 205. 

Preventive  work  of  private  in- 
surance companies,  194. 

Private  insurance  companies, 
as  carriers  of  health  in- 
surance, 190. 

Private  insurance  in  U.  S., 
experience  under,  191-3. 

Private  practice  in  medicine, 
233. 


320 


INDEX 


Profit     in     social     insurance, 

191. 
Prudential      Insurance      Co., 

187,  189,  220. 
Public    health,    education    in, 

151. 

Rates  for  health  insurance, 
difficulty  of  computing, 
217;  objections  to  legal 
rates,  219;  uniform  for 
age  groups,  222;  legal 
limitations  in  Germany, 
230. 

Refunds  of  contributions, 
148. 

Reserve  funds,  229. 

Reserve  values,  225. 

Rhode  Island,  compensation 
act,  54. 

Rochester  sickness  survey, 
238. 

Roumania,  compulsory  health 
insurance,  11,  20;  contri- 
butions under,  155;  indus- 
trial accidents  under,  50; 
insurance  organization, 
189 ;  maternity  benefits, 
123-4;  money  benefits,  du- 
ration of,  105;  scale  of 
benefit,  100. 

Rubinow,  I.  M.,  9,  14,  15,  46, 
274. 

Russia,  compulsory  health  in- 
surance, 11,  18,  20;  indus- 
trial accidents  under,  50; 
insurance  organization, 
189;  maternity  benefits, 
123,  127;  medical  aid,  70, 
237;  money  benefit,  100, 
105. 

Salaried  physicians  in  Ger- 
many, 297. 

Sanatoria,  84-5. 

Sanatorium  benefit,  253. 

Schedule  rating  in  compensa- 
tion, 228. 


Scope  of  health  insurance,  43- 
66. 

Seager,  H.  R.,  9. 

Self  insurance,  in  compensa- 
tion, 179. 

Servia,  compulsory  health  in- 
surance, 11,  20;  employ- 
ers' contribution,  156;  in- 
surance organization,  189; 
maternity  benefit,  123-4; 
money  benefit,  scale  of, 
100. 

Shifting  and  incidence  of  in- 
surance, 23-4,  165-6. 

Sickness  as  cause  of  poverty, 
6. 

Social  insurance,  1,  4,  181; 
First  American  Confer- 
ence on,  3;  International 
Congress  on,  3. 

Social  Insurance  Bureau  of 
American  Medical  Asso- 
ciation, 246. 

Social  Insurance  Commission 
of  California,  3. 

Social  Insurance  Committee 
of  American  Association 
for  Labor  Legislation,  7, 
100-1,  131,  173,  295. 

Socialist  Party,  4;  on  work- 
men's contribution  to  in- 
surance, 162. 

Socialists'  attitude  on  mater- 
nity insurance,  138-9. 

Spain,  number  insured  against 
sickness,  22. 

Specialists  in  German  sick- 
ness insurance,  305. 

Standard  Accident  Table,  64. 

Standardization  of  insurance, 
24. 

State  contribution,  156;  ar- 
guments for,  160-1. 

State  control  of  administra^ 
tion,  209-10. 

State  insurance,  181;  Euro- 
pean experience,  195. 


INDEX 


321 


State  medicine,  237;  objec- 
tions to,  238. 

State  responsibility  for  sick- 
ness, 160-1. 

Strassburg,  medical  aid  to 
family,  90. 

Streightoff,  F.  H.,  13. 

Sunday,  benefits  for,  149. 

Superannuation,  aid  to,  op- 
tional, 148. 

Supplies,  medical  and  sur- 
gical, 80. 

Surgical  aid,  75. 

Survey,  social  insurance  de- 
partment in,  3. 

Suspended  insurance,  89. 

Sweden,  health  insurance,  20. 

Switzerland,  voluntary  health 
insurance,  18,  20-1,  29. 

Sydenstricker,  E.,  9,  16,  196. 

Texas,    compensation    act,    2; 

compulsory         insurance, 

179;    maximum    benefits, 

103;     medical     aid,     54; 

scale  of  benefits,  101. 
Thayer,  quoted,  278. 
Thompson,  T.  L.,  11,  12,  27, 

190. 
Total     permanent     disability 

clause,  63. 

Trade  funds  as  carriers,  198. 
Trade  union  sick  benefits,  96. 
Travelers'  Insurance  Co.,  47, 

63. 

Unemployment  insurance,  4, 
5. 

United  Kingdom,  number  in- 
sured against  sickness,  22. 

U.  S.  Commissioner  of  La- 
bor, 96. 

U.  S.  Constitution,  275. 

U.  S.  employees'  compensa- 
tion act,  1,  54. 

U.  S.  Public  Health  Service, 
9,  196,  238. 


Unmarried  mothers,  mater- 
nity benefit  for,  120; 
problem  of,  136-7. 

Vermont,  compensation  act, 
medical  aid  under,  54. 

Visitation  fee,  298. 

Voluntary  extension  of  bene- 
fits under  private  insur- 
ance, 194. 

Voluntary  health  insurance, 
18-19,  39-40;  distribution 
of  cost,  155;  money  bene- 
fits under,  98. 

Wage  groups,  advantages  of, 
224. 

Wages,  in  U.  S.,  5-16,  12,  13; 
real,  trend  of,  274. 

Waiting  period,  optional  re- 
duction, 147,  149;  for 
medical  aid,  88;  for 
money  benefits,  106,  111; 
under  compensation,  53 ; 
under  voluntary  insur- 
ance, 108. 

Walling,  W.  E.,  16. 

Warren,  B.  S.,  9,  16,  196. 

Washington,  compensation 
act,  27,  28,  54;  no  med- 
ical aid,  67;  state  insur- 
ance, 179. 

Webb,  S.,  75,  162,  164,  170, 
187. 

Weld,  D.  H.  L.,  16. 

West  Virginia,  compensation 
act,  2;  insurance  compul- 
sory, 179;  state  subsi- 
dized insurance,  179. 

Wisconsin,  compensation  act, 
2;  scale  of  benefits,  101; 
uniformity,  8. 

Old  age  pensions,  report  on, 
4. 

Workmen's  compensation  in 
U.  S.,  1,  2,  3,  48-55;  com- 
pulsory insurance,  27,  28; 
funeral  benefit,  133;  in- 
surance under,  178-80; 


322 


INDEX 


medical  aid  under,  esti- 
mate, 308. 

Workmen's  contribution, 

amount  computed,  174; 
sliding  scale  for,  172-3. 

Women's  wage  labor,  cause 
for,  136. 


Wyoming,  workmen's  com- 
pensation act,  54;  no  med- 
ical aid,  67;  state  insur- 
ance under,  179. 

Zander  institutes,  82. 
Zwangiverticherung,  183. 


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